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DAVID KRUSE

By Staff | Dec 10, 2010

The Milk Producers Council joined other livestock groups in opposing ethanol, saying, “Last week, the board of directors … discussed this issue at length and voted unanimously to participate in the efforts to stop the extension of these subsides.

“To that end, MPC has reached out to the Environmental Working Group to see what political efforts exist for opposing the extension of these subsides. To our delight, a coalition has been developing, made up of very diverse interest groups. These groups include livestock agriculture organizations, food processors and retailers, environmental organizations, and taxpayer advocates.

“MPC has joined this coalition and will be cosigning a letter to the Senate and House of Representatives, signed by all the groups, and urging Congress to let the ethanol subsidies expire. We’ve also urged our fellow dairy farmer trade associations – particularly in the Western United States – to join this coalition in sending a unified message to Congress.”

The environmental working group is an anti-ag organization. This would be like the Corn Growers Association joining PETA to go after dairies.

The MPC has the same gripe as the others, corn prices have risen. They too liked it better when corn farmers were growing corn priced below the cost of production for government subsidies. The MPC, based in Bakersfield, Calif., was looking for support from western dairies as those in the Midwest have benefited greatly from the ethanol industry. No livestock class can better utilize distiller’s grain than dairies.

Ethanol co-product availability is located in the Midwest. This is similar to what is occurring in the beef industry. Midwest cattle-on-feed numbers are surging because distiller’s grain availability lowers the cost of production there compared to other regions.

The ethanol industry has shifted the center of gravity for the low cost of production for both the dairy and beef industries to the Midwest. Bakersfield doesn’t like it and neither does Cactus Feed yards.

The NCBA represents southern plains feeding interests in their offensive against ethanol. They are right in this being a commercial threat to them. Our feedlot, Royal Beef, located in Northwest Iowa using bedded barn technology in close proximity to four ethanol plants, is a low cost beef producer in the U.S.A.

The Iowa Cattleman’s Association seems to think that the greatest threat to members is new USDA GIPSA rules, when in truth it’s the NCBA offensive to kill ethanol. I believe that makes them NCBA members first and Iowa cattlemen second.

Iowa and South Dakota placement numbers on feed were up 12 to 13 percent last month. The location of the ethanol industry shifted the cost of gain advantage from the southern plains to Midwest feedlots resulting from the close proximity of available distiller’s grain and the ability to use the 50 percent wet product.

Ethanol naysayers including Al Gore, conveniently omit from their energy models that a third of every bushel of corn going to ethanol is returned to the feed supply as distiller’s grain. It is now the second largest feedstuff consumed in America, edging out soymeal by volume.

MPC promoted an argument that because we use diesel fuel to grow corn that ethanol is not energy efficient. I don’t think they used any science or even simple math to reach that conclusion whatsoever. An acre of corn from my farm in Iowa this year produced 609 gallons of ethanol, plus 11,368 lbs of distiller’s grain. My P and K and some N come from manure from the feedlot. Only a few gallons of diesel fuel are consumed in operations and inputs.

It is a very efficient sustainable system of corn, ethanol and beef production. It’s so efficient and sustainable that groups like the MPC have to resort to lies to make a claim like they did recently that ethanol does not reduce U.S. dependence on foreign oil, calling such reasoning rational.

It is not. U.S. ethanol consumption now exceeds all oil imports from countries except from Canada, even beating out the Saudi sources.

We wish the dairy industry well so we will not join PETA or the HSUS to attack one of our ag partners as the MPC is doing joining EWG and the anti-ethanol, anti-corn grower’s coalition. Livestock producer organizations correctly complain about misinformation distorted to disparage them and then turn around and use the same tactics against ethanol and corn growers.

When agriculture’s opponents can get the sectors fighting against each other, then they have weakened the whole.

Analysts say that 2010 is not adding up to be a good year for the dairy industry, losing $2.50 to $4 per head on milk. They forecast the dairy industry will lose another $1.50-3.00/hd next year. The industry organizations of course, blame the losses on feed costs, specifically ethanol, but what it really is, is the result of the transition of the dairy industry from traditional dairies into the mega-barns.

The industry has had two heifers in the loafing barn for every cow being liquidated, so while it talks a good game about diary cow buyouts, it’s really a smoke screen to cover expansion of the big dairies. It takes low prices and losses to discourage the small dairies to quit so the losses are part of the industry transition.

They use opposition to ethanol as a foreign threat to give them an excuse to pin losses upon when the real reason is that there are too many cows because traditional dairies are not quitting fast enough for the big boys who are adding cows.

I’m not advocating that traditional dairies liquidate, in fact, I’d prefer the opposite, but the blame for what ails the dairy industry is found in the restructuring of herd size that is occurring.

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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