Pork producers expected to adjust to increased production costs

That's the assessment from Dermot Hayes, Iowa State University's Pioneer Chair in Agribusiness.

He shared the results of a study he and other researchers at ISU's Center for Agriculture and Rural Development completed on how the ethanol industry will impact grain, oilseeds and livestock at last week's Iowa Pork Producers Association annual meeting.

If ethanol subsidies remain and crude oil, natural gas, and distillers grains prices stay at current levels, the break-even corn price for ethanol plants is $4.05 per bushel, Hayes said.

At this price, corn-based ethanol production would reach 31.5 billion gallons per year, or about 20 percent of projected U.S. fuel consumption, Hayes said. This would require 95.6 million acres of corn. Total corn production would be approximately 15.6 billion bushels, compared to 11 billion bushels today.

The CARD analysis shows a 9-million-acre reduction in soybean acreage, which can be achieved if half of corn-soybean producers switch from a corn-soybean rotation to a corn-corn-soybean rotation. Corn exports and production of pork and poultry would all be reduced.

Current corn-importing countries won't face a scarcity of corn, but they will get their corn from countries such as Argentina, which has a large production capacity, Hayes said.

Ethanol industry researcher William Tierney estimates that if all the plants that are planned are built, then total ethanol production will reach 26 billion bushels by August 2009, Hayes said. If oil prices remain at $60 or more, CARD research indicates that most of these planned plants will be built. As many as 5 billion gallons of new capacity will be announced and come online after August 2009.

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Source: Agri News

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