The Ethanol Mandate is Killing the Cattle and Hog Industry – Kevin Grier, George Morris Centre

[burnt]

Tom - that is exactly what I am doing. My herd has dropped by 1/3 and will very likely be gone this fall. I refuse to work for less than I am worth.

You and others make some very good points, while not likely fully realizing the entire impact of what you are saying.

I, too, agree that meat has been too cheap for too long, mainly because it has been unprofitable to produce beef for many, many years.

The portion of cost not being covered at the checkout was being offset by cheap feed, as was already mentioned, and by eroding producer equity, eg. - living on depreciation.

While it certainly makes sense to produce beef on land that is suitable for only that purpose, I see some real problems with isolating meat production to such certain geographical areas.

The only ones that I will point out is that it goes against what I see as a naturally complementary production system and also that the price of meat should be sufficient (taking into consideration all benefits) to allow for production on any mainstream, non-specialized type of agricultural land.

So much more to say on this matter but I have probably already over-stated my welcome . . .

However, I will say this yet - in this day and age of (fiscal) infidelity, you should no longer expect that the one who brought you to the dance will necessarily be there to take you home.

Right now the ethanol industry is making overnight millionaires of many - and it can turn them into paupers just as quickly when the circumstances provide the initiative to switch to something sexier!

Take this from someone who was pretty well set before BSE and has now, at 55 years old, seen a decades worth of equity wiped out.

So when the ethanol market evaporates (and it will) you grain growers (and I am one also) will longingly remember the day when that empty feedlot beside your field had a few grain-eating cattle in it.

Lastly, remember this - the parameters in this industry are set by the rich, the stupid and the unscrupulous. Thus, there are no guarantees.

[burnt]

**should have read ". . . overnight millionaires of many grain farmers . . ."**

[Happytrails]

Terrific discussion all. Can't blame grain growers for cheerleading ethanol subsidies. Can the hype stand the test of time? The lucky among us will see.

There is no doubt that cheap food and grain in particular is a function of cheap and abundant energy in the form of oil. For greater society cheap food is a good thing. For farmers not. We have now reached the point apparently that greater society feels comfortable enough with their cheap and abundant food supply to start playing with it. I have always thought it wrong to play with food and now I guess we will see.

There are no doubt many factors which compromise the free market system to some degree. Still its a bit surprising to see the degree of confidence some have in artificial demand (subsidy).

For me, I will mostly keep on raising beef calves and feeders on land that is marginal for growing grain. IMO there is too much risk in putting all your eggs in the ethanol basket. HT

[newguy]

Think there was a way more artificial feed grain market before ethanol. US government would gaurantee 4 bucks for corn and then dump it for 2. So is the grain market artificially high or was it just artificially low before??Like anything extremes either way is probably not good.

[burnt]

newguy, IMO you are bang on with both scenarios - neither the highs or the lows accurately reflect real market conditions.

Ironically, having said that, I don't think grains are priced too high. However, the grain price is where it is for unsound reasons as was alluded to by happytrails.

But what we have is a result of governments screwing markets around with stupid policy. One sector gets played against the other, each taking its turn as the beneficiary of misguided, harmful gov't interference.

If feed grains had not been so undervalued for so many years, the N.A. cattle herd might not have grown to where it was and corn would have been less affordable/attractive for turning into fuel.

Everything would have been in a better balance.

Socialism sucks. Government should stick to maintaining law and order as it was intended to.

Consumers should be paying for the goods at the checkout, not through their taxes, where program costs are greater than any perceived producer benefit.

How do we work toward that end, or is it even possible anymore?

[charliep]

burnt

Under your arguement, you have your scenario in western Canada - limited
bio fuel subsidies, no ethanol industry to speak of and low cost feedgrains
relative the US. I highlight again, current western Canadian feedgrain
prices are about two thirds that of the US. Cost per pound of gain should
be substantially less here. You have a competitive advantage. You also
have full access to the US for feedgrains (although very expensive) and
access the US at all stages (calf, feeder, finished) with the caveat. Nothing
to complain about.

The cattle industries challenge in western Canada is things like MCOOL
which limit access to the US and increase costs. Perhaps the challenge for
both the grain and livestock industries is to work on international trade
rules that improve access to markets and reduce costs.

[charliep]

Just making a list of ethanol plants in western Canada (prairie provinces anyway). Red Deer (small), Lloydminster, Minnedosa, Belle Plain. At least one more I have forgot in Saskatchewan.

How many under active construction?

[ASRG]

Charlie:
At Innisfail Alberta they are still trying to build an ethanol plant but it is kind of a scam, as they need some big bucks from the feds to make it work. The landowners who agreed to sell their land still get paid the option every year but nothing is happening.
I don't really think the Alberta cattle feeders are making a killing, despite what appears to be a distinct advantage over the US feeder using expensive corn. I suspect the price of beef in the stores is starting to dampen demand and the perception that pork, chicken or even fish is a better buy will not be positive for the cattle business. If the American economy continues to falter I can see the demand for high priced beef tanking in a big way? The feeder will only be able to survive by either paying less for feeder cattle or paying less for feed grains? With a limited supply of feed grain(due to ethanol and acres drawn to crops for bio deisel) it is unlikely we will see a big drop in feed grain prices? Lower calf prices will excelerate the kill down of the cowherd...a vicious cycle to the end of the industry!
The new reality of fuel production from crops should be driving research to produce new crops and improving others to take advantage of better profit potential for farmers? For example: Better disease resistant canolas so the rotation could be shortened..... can you imagine how prairie farms would be much more profitable if canola could be grown every year!

[charliep]

To compete with a 40 bu/acre canola crop (cost side equal which is likely not the
case) and $10/bu, a cereal crop has to produce $400/acre. That is a 100 bu/acre
feed barley crop sold for $4/bu or a 80 bu/acre feed wheat crop at $5/bu.

Nothing to suggest the decline in cow numbers is slowing in the US. Even when
it does, heifer retention will have to start which will squeeze numbers even more.
In the world of a slower North America economy, the hamburger world has set in
with the consumer (what they can afford) - cow values will stay high.

Demand side is the biggest question - both North America and world. Add in
ongoing challenges to open some markets up after BSE (eight years after the
event) and regain consumer confidence in off shore markets.

Nothing to do with ethanol but realities of the market. Do recognize the
interesting challenges of livestock high prices and high cost feed.

[charliep]

Weird comment but I would feel a lot more confident as a traditional mixed
operation these days with both cattle and grain. Lots more options in a crappy
year like the current and ways to manage risk/use resources productively.