With persistently wet conditions in parts of the Midwest worsening and some areas suffering catastrophic flooding, cattlemen are “now looking straight down the barrel of $7 corn, and that may just be the beginning,” says Gregg Doud, National Cattlemen’s Beef Association (NCBA) chief economist.
“We already saw a lot of acres migrating away from corn this year, and that was before the wet spring pushed into June. By the time conditions improve in many of these fields, planting corn will no longer be an option,” he says.
Thanks to congressional mandates for production of grain-based fuels, more than a quarter of last fall’s strong harvest was required to meet ethanol production mandates. This figure will grow much higher in 2008, as the production mandates have increased, corn plantings have been delayed, and corn crop progress has been extremely slow, NCBA says.
“USDA is now projecting a significant decline in per-acre yield for corn, on top of the reduction in corn acreage,” Doud says. “This puts a tremendous squeeze on all users of corn, but especially those who do not receive any tax credits or other subsidies to generate their end product.”
In written comments submitted to the Senate Energy and Natural Resources Committee, NCBA President Andy Groseta says many cattle feeders are currently losing about $150/animal.
“These losses will be passed on to the foundation of our industry, the cow-calf producer. For every $1/bu. increase in the price of corn, a cattle feeder must pay $22/cwt. less for a 550-lb. feeder steer.”
Several legislative proposals have been introduced to freeze or reduce ethanol production mandates, and to reduce or eliminate incentives that divert feedgrains toward ethanol production. Without endorsing any particular proposal, Groseta urged the committee to carefully weigh current market conditions as they debate these issues.
“Cattle producers have always depended on the free market to drive their business, and as long as cattle producers have the ability to compete on a level playing field with the ethanol industry for each bushel of corn, the U.S. beef industry can and will remain competitive,” Groseta said. “NCBA feels it’s time to level the playing field and allow market forces rather than government intervention to guide the production and use of ethanol.”
-- NCBA news release