Let’s Talk Ethanol

By Jay Wolf

No topic generates more passionate discussion in the beef industry right now than the explosive growth of ethanol.  Corn prices have doubled this fall, despite the third largest harvest on record.  What has been the primary cause?  Demand for corn from the ethanol industry certainly tops the list. 

The effects on cattlemen run the spectrum.  Ranchers have seen prices for their calves drop a record amount during the last four months.  Farmers, many of whom also own livestock as a secondary source of income, have enjoyed the higher grain prices after years of depressed markets.  Cattle feeders have seen their costs of production rapidly escalate, leaving most operating in the red.  However, in the longer term, Nebraska’s feeding industry should have a distinct cost advantage when compared to the southern Plains due to our proximity to distiller’s grains, feeder cattle and the packing industry.  The ethanol industry has been a source of rural development in our communities. All cattlemen share our nation’s desire to become less dependent on foreign energy supplies, particularly since we have been hit by high fuel costs.  Most important, many of us know someone serving our country in Iraq or Afghanistan.

This is a complex issue and if you ask five cattlemen, you’ll get six opinions. NC recently completed its state convention and set policy for many issues, including ethanol. I’d like to share with you the carefully constructed ethanol recommendations our members developed. 

1. Membership education: Our first order of business is to educate beef producers about the reality of the changes taking place.  We will focus on gathering facts and then suggest ways to adapt and, in time, succeed in a world vastly different from the one we knew only months ago.   Understanding and adjusting are the most critical responses all producers must take.  NC hosted a series of ethanol meetings in January and this topic will be on the agenda of future meetings as well. 

 2. Research funding: NC will be asking the Federal Government to reallocate a small portion of the massive amounts currently pegged for renewable energy research.  Additional research for multiple issues arising from ethanol’s growth is needed so cattle producers can adapt and change. These issues include managing phosphorus, increasing use of distiller’s grains in rations, finding additional ways for cow-calf producers to utilize those ingredients, and methods for storing them.

 3. Oppose mandates: NC is opposed to any additional federal or state mandates for ethanol production or usage.  The current Renewable Fuels Standard (RFS) calls for minimum ethanol production of 7.5 billion gallons by 2012.  There is talk by many in Washington, D.C., that the RFS should be 15 billion gallons.  The concern here is the rule of unintended consequences.  Mandates can be dangerous.  Imagine this scenario.  If the RFS is increased to 15 billion gallons, ethanol would use 5.5 billion bushel of corn (this year’s crop was 10.7 billion bu.).  If a short crop occurs, the 15 billion gallons would be produced, regardless of the price of corn.  Corn used for the livestock industry would have to be reduced, which could result in massive losses and herd liquidations. We don’t want to strive for more energy independence only to find out that we destroyed the livestock industry along the way.

 4. Safety net: NC supports a transition to a market-based approach for the production and usage of ethanol.  It is time to look at alternatives to the current tax credits and import tariffs that support the ethanol industry.  These protections were necessary during the years ethanol was struggling to become established and oil prices were low.  However, much has changed very rapidly.  NC understands the need to maintain a safety net for the ethanol industry.  We, too, want to avoid ethanol’s huge investment being destroyed due to energy price manipulations by foreign governments.  NC simply believes the current support system should be debated and carefully modified.

5. Shared vision: NC has worked closely with corn and ethanol organizations to foster mutually beneficial programs and policies for Nebraska, recognizing that all three industries are interdependent. We have participated in their meetings and vice versa. We have a good relationship with them and we have all committed to maintain that for the benefit of each of the memberships and for Nebraska in general.  Y Jay Wolf, Albion, is NC president.