Initial Ethanol Push Challenges Beef Market

US - Like it or not, ethanol is coming, and beef producers must be prepared to weather the transitional phase and capitalize on the potentials in the future, said two speakers at the Southwest Beef Symposium in Amarillo.
calendar icon 23 January 2007
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"The short run is going to be tough, but in the long run, things will work out," said Dr. Steve Amosson, Texas Cooperative Extension economist.

Feed prices are being driven up by predictions of 3 billion gallons of ethanol production capacity coming online in the next year. Ethanol would require almost an 8-million acre increase in corn acreage, which equates to an additional 1.1 billion bushels of corn, Amosson said.

"I feel the corn prices will range from $3 to $4.25 per bushel on the board for the next couple of years, and the differential between corn and sorghum will narrow," he said.

Competition for acreage will increase, forcing other feed sources and crop prices higher.

In the short run, fed cattle prices will remain relatively unchanged, and feeder cattle and calf prices may continue to soften, Amosson said. A rule of thumb, he said, is calf prices will drop $1.50 per hundredweight for every 10 cent rise in corn prices.

This is going to reduce the predicted expansion phase of the cattle cycle, he said. But in three to four years that reduction will have cattle producers seeing record prices.

"Cattlemen also have a potential to gain market share relative to the swine and poultry industries because cattle can be fed the distiller's grain by-products, where the other industries can't," Amosson said.

Source: Ag News
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