Ag Economist: Animal Agriculture Is Transforming

The biofuels industry is driving changes in the livestock industry, an Iowa State University agricultural economist says.

Published on: Feb 22, 2007

Animal agriculture is changing and more changes are yet to come as the biofuel industry continues to expand, according to Iowa State University agricultural economist John Lawrence.

Speaking at the Kansas State Research and Extension Swine Profitability Conference this month, Lawrence said that with the rapid growth of ethanol, agriculture has become a fuel producer.

"Yes, there will be enough corn," he says, "but markets aren't kind, gentle or smooth." With the influence of ethanol, corn prices are now more closely linked to crude oil prices, he says. For instance, world oil prices around $60 per barrel could cause ethanol expansion that would raise corn prices to around $4 per bushel.

Increased availability of dried distillers grains for livestock feed - Lawrence estimates about 46.8 million tons for 5.5 billion bushels of corn used for ethanol production - can reduce costs for livestock producers, but would not be enough to offset higher corn prices, Lawrence says.

Lawrence also warns livestock producers of more corn basis volatility in the future, saying that "storage is key."