Cattle Farmers Pay Price for Ethanol Boom Record-high grain prices have been an economic boon for some Midwest farmers, but they're causing headaches in the cattle and beef-packing industries. The higher cost of feed grain — which is driven by the growing demand for ethanol — is squeezing many small feedlots.
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Cattle Farmers Pay Price for Ethanol Boom

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Cattle Farmers Pay Price for Ethanol Boom

Cattle Farmers Pay Price for Ethanol Boom

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PETER HANCOCK (Kansas Public Radio): I'm Peter Hancock and here just outside of Emporia, Kansas, people in the cattle business think very differently about the ethanol boom and the record-high grain prices that go along with it.

Richard Porter owns this feed lot, which runs about 8,000 head of cattle at any given time. After he buys young cattle from stockmen, he weighs and vaccinates before herding them into pens where they're fattened out on a high-protein diet made up mainly of corn.

Porter says that for the time being the high price of corn is taking a bite right out of his bottom line.

Mr. RICHARD PORTER (Owner of Feed Lot): It's a very negative impact on the cattle currently on the ranch because the cost of grain went up to significantly higher levels than what was anticipated when the cattle were purchased.

HANCOCK: Just in the last six months, corn prices have gone from about three-and-a-half dollars to more than five dollars a bushel. It takes about 40 bushels to fatten out a cow so that means feed costs have gone from about $140 to more than $200 per head. Multiply that by tens of thousands of cattle per year and you get the picture.

But Porter says he won't continue taking the hit if, as most people expect, corn prices stay as high as they are. Instead he'll adjust his costs by paying less for feeder cattle.

Mr. PORTER: Going forward it should not have any real impact on me because the price of the calf that I get in, the marketplace will back that up, commensurate with the increased costs that people like me that grow and finish cattle will have. And so the increased grain costs are going to negatively impact the cow calf producers.

HANCOCK: And cattle producers aren't the only ones feeling the pinch from high grain prices. Just a few miles up the road from Porter's feed lot, Melvin Stanford has been raising hogs for more than 70 years and hogs are raised almost exclusively on corn feed.

Mr. MELVIN STANFORD (Hog farmer): Well, I think the ethanol industry definitely has had a big effect on it and then our exports have been large too. Our exports of corn grain, particularly to China. But we feel like the ethanol industries had the greatest effect.

HANCOCK: According to beef industry experts, cattle production is already starting to fall, especially here in central Kansas, where in January, Tyson Foods announced plans to shut down its Emporia slaughterhouse, eliminating 1,500 relatively high-paying jobs. The main reason cited: a declining supply of cattle, which is due in part to the rising cost of corn.

That was a major blow to this town of just 26,000 people, and one that's already having a ripple effect on other businesses. Just ask local realtor Larry Eck.

Mr. LARRY ECK (Realtor): We have been in the last ten years, been in very much a seller's market with more demand than there is supply, and it seems like over the last 30 days we've just flipped that around.

HANCOCK: Kansas was slow getting in on the ethanol boom. To date, there are only seven ethanol plants in production here and this is one of the few states in the corn belt that doesn't mandate the sale of ethanol-blended gasoline. That also helps explain why dry distillers grain, a byproduct of ethanol production, isn't used much here as a form of livestock feed.

But while several communities are now actively trying to recruit ethanol plants, there are signs it may be too late for Kansas. Last week Cargill announced it was suspending plans to build a 100 million gallon-a-year ethanol plant in Topeka. Among the reasons cited: the skyrocketing price of corn.

For NPR News, I'm Peter Hancock.

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