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www.NAIBER.org. Ethanol and Cattle Feeding: Economic Implications. Ted Schroeder Agricultural Economist Kansas State University High Plains Biofuels Co-Product Nutrition Conference Garden City, KS - - February 20, 2008. 2.8 gallon. 56 lbs. 17-18 lbs.
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www.NAIBER.org Ethanol and Cattle Feeding: Economic Implications Ted Schroeder Agricultural Economist Kansas State University High Plains Biofuels Co-Product Nutrition Conference Garden City, KS - - February 20, 2008
2.8 gallon 56 lbs. 17-18 lbs.
Is the Ethanol bubble about to burst? No, but it is facing some growing pains
Ethanol Gross Margin based on Futures Prices, April 2005 – January 2008
US President George Bush State of Union Address Jan. 23, 2007 “To reach this goal, we must increase the supply of alternative fuels, by setting a mandatory fuels standard to require 35 billion gallons of renewable and alternative fuels in 2017 -- and that is nearly five times the current target.”
Implications for High Plains Cattle Feeding • Higher grain prices • Greater grain price volatility • Stronger grain price basis & variability • Cattle on high energy feed less time • Regional shift of cattle to bio-refineries • Intense competition for trucks
Corn is more expensive Corn price Stock to use ratio
Will we plant our way out of this? Futures Prices February 15, 2008 Corn CBOT DEC ’08 $5.38/bu DEC ’09 $5.08/bu DEC ’10 $5.02/bu Soybeans CBOT NOV ’08 $13.17/bu NOV ’09 $12.52/bu NOV ’10 $12.49/bu Hard Red Wheat KCBT JUL ’08 $10.16/bu JUL ’09 $8.75/bu
Corn Price is more variable & insurance more expensive 62% increase in Price of an option
Corn price more expensive than NE and volatile price differences
Corn is a poor cross hedge for DG price risk $40/ton basis variation
Truck freight with ethanol production to almost double 2002 to 2020. Driver shortages projected to reach 219,000 by 2020. Ethanol Transportation Backgrounder, USDA, Sept. 2007
Implications for High Plains Cattle Feeding • Higher grain prices • Greater grain price volatility • Stronger grain price basis & variability • Cattle on high energy feed less time • Regional shift of cattle to bio-refineries • Intense competition for trucks