Ethanol the down fall of American Farming

[highyields]

What was once considered to be the cure for low prices may be the disease that brings the final chapter to production agricultural in the United states.    While the very short term view has been taken by many in agriculture today as ethanol the savior, I would like to argue that point.   I can't say its been bad in the short run, we've had some really good years.  But there has been major problems in implementation of the bio fuels industry.    One was the idea that we can produced every drop of bio fuel from corn.  Corn was already a major crop in the US and the world, but we allowed everything to get out of balance.  Now in 2012 we are having a very rare event something that only happens once in 30 years, and that is a major drought in both hemispheres and a drought in the heart of the corn belt in the United States.  Since we are out of balance due to ethanol and corn demand now other industries are going to suffer.  Animal agriculture, every sector will feel 2012 for years down the road.  With the increase in corn acres, we have seen a major shift away from cow/calf production and hay productions in some areas.  Due to the lack of hay this year more cows will be taken out of production then normal this year.  It takes 2 years to take a heifer and place her in the cow herd.  That means we are looking another 2 years of higher then average feeder cattle prices, just because of heifer development.  another 4 years or more of higher then average feeder cattle prices due to higher then average heifer retention. 

The feedlots can't do that and stay in business.  What will happen is we are going to see an increase of feeder cattle imports, thus hurting the US cow/calf industry in the long term.  

I'm sure there will be very minimal expansion in the hog business or dairy business this year.  Both can be attributed to higher feed cost.  Dairy has a double cost increase both in corn and hay.  

What we have done by adopting ethanol as our poster child for corn production, we have left our old loyal customers in the shadow of ethanol plants.   Animal agriculture, feeding corn through the animal to market the corn  IS THE FIRST AND ONLY VALUE ADDED COMMODITY available for farmers.  

There has been rumors that they may lift the mandate to produce ethanol.  Will they place it back on?  

All of this will be going on the face of higher money cost due to higher interest rates in years to come.    

Agriculture will looking remarkably different in 20 years,  most of the change will be traced back to a 6 -8 year period we are living in right now.  

Corn ethanol was a non sustainable option when it was brought to the table years ago,  But yet its here and we have to live with the consequences. 

[hardnox604008]

I wouldn't worry about a major permanent change to the ethanol mandate with one possible exception.

That would be if we find ourselves perpetually unable to deliver back to back 160ish crops which is a circumstance that didn't come up when NCGA/Monsanto sponsored expert witnesses were assuring congress that we'd be regularly popping off 170s by now. My concerns about the "concepts" that were presented there didn't get much interest- too bad that I turned out to be right.

Might see some temporary changes if this crop comes in sub 140, probably closer to 130 for things to nearly force some action.

Whether the whole thing was a good idea or not, for the umpteenth time I'll submit that my problem was with the size and timeline of the mandate goals. 9-10 bgy would have taken care of the MTBE replacement (which would have been  huge for agriculture in its own right). Then you could have created some sort of countercyclical mechanism for more when the grain was there to make the hooch.

So sure, I agree with you- the combination of greed and bad politics can certainly cause some severe unintended consequences down the road but good luck on getting anyone to sit and listen.

A public policy note- it is always a bad idea to spoil anyone too badly- there is nothing you're going to do to keep them happy other than to give them more of what they now consider their entitlement.

[Jim Meade / Iowa City]

1/3 of the ethanol grain goes back to feed.  The question of ethanol consumption is a political solution based mostly on environmental concerns.  Let the politicians figure out how to handle the environmental issue and then let grains sort themselves out over time.  No doubt, livestock will hurt for several years and it will lead to consolidation.  The question of what the American farm looks like is another political question which can be addressed.  We'll have to deal with the fall out of these decisions and for my part, I'd just as soon do that and let the market react to it as it will.

[smokeyjay]

Respectfully disagree with you.  It makes little difference, "value added" marketing does not care whether the primary product transforms into meat or ethanol.  Both are products of corn.  There may be an original, but it's not the only one.

The ones who recognize this and find out how to adapt will survive.  That's capitalism, pure and simple.

[hardnox604008]

I don't want to parse words too closely, but anyway.

You have to compete with your neighbors and the marketplace and probably have a right to feel good about successfully doing so.

But lobby driven corporate cronyism isn't capitalism in the strictest sense. There was competition in the Soviet Union too, but it wasn't very capitalistic.

[smokeyjay]

I'm not sure of your definition of cronyism, especially when the farm commodity lobby is concerned.  It's a grassroots based effort to secure fair and equitable legislation by representing farmers in the halls of Congress. The farm bill and ethanol mandate are supported by commodity groups.  So, are you saying farmers are the ultimate cronies? 

[sw363535]

Nox,-------------------"lobby driven corporate cronyism"

Remember the first strong agriculture lobby,  The Dairy industry was the first and most effective at getting their wording into farm bills.  years ago.

Maybe------------------What goes around comes around.

The use of corn for alcohol is no more irresponsible than the use of corn sweetners for soft drinks.   It is just another use of the product.  

If the use of alcohol in gasoline is as effective as claimed in improving emissions then the use will continue without the mandate.  If it is economically doable it will be done.

So, isn't the price of gasoline creating the advantage of ethanol over livestock feeding?   Or Isn't it time for the consumer to pay for meat and dairy.  Most of our population now lives in the city and could care less about agriculture.  Why do we owe them a cheap food supply?  It is the best food supply chain in the world, the urban US citizen should be competing with the other urban areas of the world for it.

------------------------

Think how much meat will sell for on the rural market when the cities outlaws red meat consumption.  

Watch New York if they limit the size of soft drink containers(as proposed).  I am betting consumption and price go up.

Government always gets too much credit and denies responsibility.

[Kay/NC]

Taking corn to an energy end use, instead of/in competition with feed to food use, is not exactly the same competitive atmosphere that always existed in the selling of the crop.  When pickup trucks stopped being all about work, and more about status and style, their prices got scary.  

Accepting a huge subsidy for blender's credits from the ADM Rule isn't exactly capitalism, either...it feels a tad bit socialistic to me.  No doubt, that was a crony-driven deal, but what did we expect out of Clinton????

[hardnox604008]

First, my original post said that I wouldn't worry too much about the ethanol mandate going away and if there is any risk to it it lies in the poor policy construction within- that does make it somewhat vulnerable.

But anyway- first, world grain produces approximately 3% of the total BTUs annually that fossil fuels do- and even at that the former is a partial derivative of the latter. So the severe limitations to the whole concept are quite evident. Even if you could double it- with some net energy gain- from cellulosic (which looks increasingly unlikely) you still don't got much.

Second, an absolute mandate without some mechanism for elasticity to supply and demand  is not a free market device.

If we'd taken the 9-10 bgy from the failure of MTBE, said thank you, fired all the lobbyists and went home we'd be in a more defensible position.  We could have pulled that off but an extra billion bushels of demand over a few years is a very big deal- devil is in those details.

[highyields]

A better approach to the biofuels would have been not to place the mandates as high as they where UNTIL we had cellulosic ethanol on board.  I watched a lecture out of the University of Nebraska about how far cellulosic ethanol has come. 

With all the ethanol suppose to come from corn it just place a burden, and with the weather situation as it is, placed a huge burden on corn acres at the expense of conservation and hay production along with beef production.

If one could calculate the amount of bankruptcy's that have been caused by politicians I imagine it would scare a person. 

There is a feedlot that is ceasing business due to the cost of feed in my area.   Just found that out yesterday.   The last diary in my county sold out this spring due to feed cost.   I've been able to stay in the beef business just because I'm to bull headed to quit.  Because the land resources could be producing more on a corn/soy rotation at this time.