Impact of ethanol expansion on the cattle feeding industry

The U.S. has a history of producing surplus corn, but the current and projected growth in ethanol production combined with strong feed and export demand is causing an overall increase in corn utilization. Although livestock feeders are projected to remain the largest users of corn, corn utilization can be reduced if ethanol co-products are used to replace a portion of corn in finishing rations. The objective of this study was to determine the economic trade-offs for cattle feeders when facing higher corn prices and increasing supplies of ethanol co-products. A stochastic partial budget model was used to determine the impact on the cost of gain when ethanol co-products are substituted into rations at varying inclusion rates. The model was built for all four major cattle feeding states: Texas, Nebraska, Kansas, and Colorado. Ration scenarios were developed for each state, based on the research results of feedlot nutrition and personal communication with feedlot operators. The various scenarios were simulated to determine the impacts of changing corn prices, corn processing costs, cattle performance, and feeding and transportation costs for Wet DistillerâÂÂs Grains with Solubles (WDGS) on the key output variable, cost of gain. The model results indicated when 15 percent WDGS (on a dry matter basis) replaces a portion of corn and protein supplement, the simulated cost of gain is lower than the base ration scenario when the feedlot is located within 200 miles of ethanol production. When feedlots are located more than 200 miles from an ethanol plant, Dried DistillerâÂÂs Grains with Solubles (DDGS) can be fed to lower the cost of gain; therefore, ethanol co-products can be fed to help offset potential increases in corn prices. The partial budget model is a useful tool for livestock, corn, and ethanol producers who are attempting to determine the impacts of ethanol expansion on corn price and utilization. Policy makers can also benefit from the model analysis as they face decisions in the future regarding ethanol and farm policy alternatives