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DAVID KRUSE

By Staff | Aug 27, 2010

Duane Gangwish came from the Nebraska Cattlemen’s Association to take over as executive director of the Iowa Cattlemen’s Association for retiring Bruce Berven. The competitiveness of the Iowa cattle industry has been significantly enhanced by the advent of the ethanol industry and subsequent cost of gain advantage stemming from the availability of wet distiller’s grain as the ethanol co-product to Midwest cattle producers.

Historically, the cattle-feeding industry had shifted south to warmer climates as cheap corn was railed to Plains’ feedlots. Feed transportation costs of moving grain south from the Corn Belt to the southern Plains did not negate that region’s cost of gain advantage over the Midwest.

The Plains cattle feeding region was built on cheap corn and cheap energy costs. Both have changed. Distiller’s grain must be dried in order to be shipped so feedlots in close proximity to ethanol plants can use the 50 percent wet product at significant savings.

It is enough savings to offset the cost of gain advantage held by the South, producing a significant change in the economic competitive balance between the two cattle feeding regions. The adoption of technology, in the form of hoop barns or monoslope, bedded barns neutralizes the climate advantage once held by the South as well as having environmental regulatory advantages.

The low cost cattle producer today is a monoslope, bedded barn located in proximity to ethanol plants in the Corn Belt. We have seen cattle on-feed numbers begin to shift back North as a result. This event has not gone unnoticed by southern feedlots who, through the National Cattlemen’s Beef Association, have been hiring lobbyists to kill ethanol subsidies and convince the Environmental Protection Agency not to raise blending cap limits to E-15.

When NCBA represents its desire for a level playing field relative to government subsidies, it conveniently forgets how it benefited from government subsidies paid to corn farmers to grow grain despite burdensome oversupply pushing prices below the cost of production.

Cheap corn allowed them the financial ability to be able to afford transportation costs of railing corn south to feedlots.

NCBA is more concerned about losing its cost-of-gain advantage to northern feedlots than it’s subsidies in its effort to undermine the ethanol industry in Washington D.C. The ICA has had little to say on the subject.

Most ICA officers are loyal NCBA members so being confronted with a regional difference in interests that puts them in an uncomfortable position. My experience is that ICA said the right thing right up until they have to do something about it and then caves into NCBA.

The NCBA is pursuing policy that is in direct challenge to Midwest cattlemen’s interests who have benefited from the development of the ethanol industry.

The NCBA recently had one of its financial crisses and ICA officers passed the hat to raise thousands of dollars to bail them out. I find a lot of irony in that since NCBA financial resources go to support lobbyists working to kill ethanol subsidies and block raising the ethanol blend cap.

If ICA were really representing its member interests, it would be raising thousands of dollars to stop the NCBA, which would like nothing better than to see Midwest ethanol plants shut down like biodiesel plants did.

They want cheap corn and the ethanol industry competes with them for it. The ethanol industry is the only significant replacement the country has to foreign fossil fuel. NCBA is allied with the American Petroleum Institute opposing ethanol.

Texas oilmen and cattlemen are rubbing shoulders opposing ethanol together.China is beginning to buy U.S. corn. China subsidizes the price of domestic corn so that it is economically advantageous for them to import U.S. corn. U.S. corn exports raise the price of U.S. corn yet NCBA doesn’t oppose Chinese corn subsidies, just U.S. ethanol subsidies.

ICA and NCBA have had policy differences in the past, but this one is different because NCBA supports policy against the ethanol industry that would injure the Midwest farm economy and Midwest cattle industry promoting the interests of southern Plains’ feedlots.

It will be interesting to see how ICA responds. Will it be neutral ignoring the issue, a response which supports NCBA and concedes competitive regional differences benefiting Plains’ feedlot over those in the Midwest? Or will it step up to challenge NCBA?

Past history says not to expect too much from the ICA, but you never know. Duane Gangwish said that “Iowa should be the sweet spot for cattle production.” That’s right, but not if NCBA can help it.

David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet.

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