Even Some Livestock Producers Oppose Easing Ethanol Mandate

Livestock circles are abuzz with chatter about feed costs. One specific topic involves easing the ethanol mandate in the Renewable Fuels Standard.

Published on: Aug 24, 2012

The premise is easing the ethanol mandate would trim corn going to ethanol. Using less corn for ethanol would free corn for other users, including livestock feed, at possibly lower prices.

In an early August Farm Futures survey, 385 farmers (22.8%) of the 1,691 farmers responding to a question on easing the mandate agreed or strongly agreed that the federal government should temporarily suspend it due to the high price of corn.

The vast majority, 1,306 farmers or 77.2% of respondents, disagreed or strongly disagreed that Washington should ease the mandate.

In a Farm Futures survey, 77% of livestock producers disagree that Washington should ease the mandate. .

Another question involved livestock breeding herd management practices. Of the 1,548 farmers responding to that question:

*274 said they would cull faster than normal

* 214 said they would not cull faster than normal

* 89 said they were not sure

* 971 said the question did not apply

Number of farmers offering the first three responses total 577. Presumably those 577 farmers are livestock producers. That's 192 more farmers who presumably have livestock than the 385 who believe Washington should ease the ethanol mandate. Plus the breeding herd question had fewer total respondents.

A huge number of crop farmers have yields well short of expectations. Understanding why they would not favor policy moves that might trim crop prices is easy. They need every penny they can get on price to offset yield shortfalls.

Grain markets are striving to find prices that will balance supply with demand. That process involves rationing supplies such that some buyers decide they do not need to buy grain at some lofty price level. That's how the free market system functions.

Whatever the market does, it overdoes. Grain markets will overshoot, to the upside, the prices needed to entice some users not to buy.

The market will find a price that will assure that we do not run out of corn before 2013 crops become available. Demand can be rationed away relatively rapidly. All participants need to recognize that once demand is rationed away, it takes a long time to rebuild. Plus some of that demand may never come back. The higher prices go, the longer it takes to rebuild the base.

Learn more about the RFS debate using the following links:

EPA Issues Request for Comment on RFS

USDA Estimates Shake Up RFS Debate

Renewable Fuels Standard, Biofuels Continue to Take Hits

Senators Support RFS Waiver

Lawmakers Join Livestock Groups In RFS Debate

RFS Drought Debate Continues

RFS Questioned As Livestock, Ethanol Producers Butt Heads

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