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As heads of their respective associations, Roy Lindsey and Scott Dewald can argue all day whether pork or beef should be what’s for dinner.
As heads of their respective associations, Roy Lindsey and Scott Dewald can argue all day whether pork or beef should be what’s for dinner. But the two are in total agreement that pork and beef producers in Oklahoma are getting served up on a silver platter when it comes to rising feed prices.
Dewald serves as the executive vice president of the Oklahoma Cattlemen’s Association, while Lindsey is the executive director of the Oklahoma Pork Council.
Surging corn prices, largely from the increased demand in ethanol fuel production, have put a pinch on both pork and beef producers in the state.
Speaking at a U.S. House Agriculture Committee hearing in May, executives from Seaboard Farms, the third-largest hog producer in the U.S., told legislators the company is expecting to pay an additional $85 million in feed costs this year.
In the last few years, corn prices have nearly tripled to what is expected to hit an all-time high of $8 per bushel this year.
The response by meat producers is to bring fewer animals to market.
“That’s why you’re seeing prices go up in the supermarket,” Lindsey says. “It’s a pretty simple economic equation.”
Dewald says there are a couple of ways to mitigate higher corn prices.
“None of them are very attractive,” he says. “One is to feed less cattle. Economic signals from a high corn market signal people to get out of the livestock feeding sector. That’s very dangerous for us. The other thing that people realize in our industry is that anything that impacts the cattle feeding end will be translated in lower calf prices.”
Dewald says the majority of his members are cow-calf producers who also sell calves on the market. If feeder cow prices go down, so does the price for calves.
“Anything that increases input costs for our members is a touchy issue,” he says. “Volatility in the corn market leads to a lot of confusion and uncertainty. Obviously, corn is one of the major inputs we use in livestock production.”
Producers really started feeling the heat beginning in the fourth quarter of 2010. The U.S. agriculture department dramatically decreased its estimate of corn production.
A few days later, the Environmental Protection Agency announced it would allow the amount of ethanol blended into fuel to increase from 10% to 15%, further allowing fuel mixers to dilute gasoline, while using even more corn.
Fuel blenders get up to a 45-cents-pergallon credit for mixing ethanol into fuels.“From a public-policy standpoint, we’d like to see the ethanol subsidies done away with.”SCOTT DEWALD
Earlier this year, Sen. John McCain said that was on many farmers’ minds when he told CBS’ “Face the Nation” that “ethanol is a joke. And it’s multibillion-dollar spending.”
“From a public-policy standpoint, we’d like to see the ethanol subsidies done away with,” Dewald says. “If ethanol is a viable alternative, it needs to stand on its own two feet. Let’s have a fair and open marketplace versus one that just basically takes money out of the cattle complex and puts it in the corn complex through ethanol subsidies. It’s artificially inflating the price of corn.”
And the future doesn’t look to rosy for the summer. Early corn planting fell behind this season due to natural disasters. The Chicago Mercantile Exchange estimates flooding along the Mississippi will result in between 500,000 and 1 million acres being ruined this season, resulting in nearly 175 million bushels of corn lost.
There already was little breathing room for the industry.
The corn industry is coming off its lowest-ever crop carryover from the previous year, with less than 5% of last year’s harvest carried over.
Scott Dewald, executive vice president of the Oklahoma Cattlemen’s Association, says there are ways to mitigate higher corn prices, but none are very attractive.