SASKATOON — Livestock producers could find relief from feed costs if the United States corn harvest meets expectations of a bumper crop.
However, the demands on that crop for biofuel, exports and food will continue, said Joel Newman, president and chief executive officer of the American Feed Industry Association.
To meet the U.S. federal renewable fuels standard, ethanol production takes 45 percent of all corn produced in the U.S. Earlier projections about more cellulosic-based ethanol have not materialized so demand for corn remains.
“They have a mandate to pull that corn out and they have the first shot at it,” he said at the western nutrition conference in Saskatoon Sept. 24-26.
“That means we have highly inelastic ethanol demand so we don’t have much control over that and it is left to the rest of the users of this crop to determine how we are going to adjust to that,” he said.
This has caused a close correlation between corn and crude oil prices but corn markets are falling because of a good crop and crude oil prices are dropping as well.
It remains unknown whether the U.S. government will change the renewable fuel standard mandate. If a higher ethanol content blend becomes required, corn demand will likely rise and prices will climb again.
“It has been positive for grain producers, no doubt about it. It has helped the agriculture community on that side, but for livestock and poultry producers it has become a very difficult scenario to deal with,” he said.
Increased global production of corn and soybeans tempered prices, which could have been even higher than they are now. In this decade, South America has produced 62 percent more corn while U.S. production of corn is up by 19 percent.
As well, China’s role in the market remains a mystery. Its livestock production is increasing more quickly than its ability to grow more grain causing it to increase imports. China is expected to import 9.95 million tonnes of corn this year, up from 5.75 million in 2012-13, said the USDA.
The good news for the U.S. is the astronomical increases in corn yields on a limited land.
If this year’s harvest comes in as predicted the pressure on the livestock sector could come off.
“If we continue to maintain this trend and continue to increase these yields, you will see we will work our way out of this scenario with the renewable fuel standard and it will release the pressure that has put on us,” Newman said.
The U.S. livestock industry and oil companies would like to see the fuelmandate eliminated.
But Newman doubts the federal government is ready to make such a significant change.