This opinion piece by Jere White, Executive Director of the Kansas Corn Growers Association and Kansas Corn Commission, was written in response to a Dec. 28, 2011 article written by Bruce Blythe of Drover’s Cattle Network titled “Milk, livestock rare standouts amid broader 2011 commodity slump”
While prices have slipped for grains, they are climbing for livestock and dairy. Livestock and dairy interests have continued to clamor for cheaper corn, blaming ethanol for high grain prices and lower profit margins. However, the main factor affecting livestock and dairy is demand for their product, especially overseas. Grain checkoffs continue to be strong and dependable funders of efforts to build meat exports. The Kansas corn checkoff has funded these efforts through the US Meat Export Federation (USMEF) for well over 30 years, surpassing $1 million in funding seven years ago. The Kansas Corn Commission was the first grain checkoff to fund USMEF and became a member of USMEF’s elite Million Dollar Club in 2005. Why? Because strong meat exports and strong meat prices, mean strong markets for corn.
Corn prices, which were already low, became unbearable in the late 1990s, with prices from 1998 to 2001 ranging from $1.81 a bushel in 1999 to $2.03 in 2001. Grain producers felt a need to create additional markets for their grain, and many invested in ethanol plants. For many, this wasn’t an easy decision. Many Kansas growers took a big gamble during a multi-year drought to buy shares in ethanol plant projects. But growers were selling their grains well below the cost of production, realized that a more diversified market for their grain was needed. Ethanol was a good fit, especially for a livestock feeding area like Kansas, where a third of the grain used to make the renewable fuel, returns to the feed trough as distillers grains. Kansas plants can sell their distillers grains wet to local feeders. The synergy between corn production, ethanol plants and cattle feeders is well documented.
Ethanol production did cause an increase in corn prices. Growers supported growth of the ethanol industry because they needed higher corn prices. In 2008, a so-called “corn shortage” that turned out to be the second largest corn crop in history, created a frenzy among grain speculators. Food companies, oil companies and livestock and dairy organizations jumped on the bandwagon, pointing the finger at corn prices for spikes in food prices. Record fuel prices (transportation and packaging are the main factors in food prices) were ignored as was the fact that the amount paid to farmers is less than 20% of the food dollar. A multi-million dollar campaign was launched by the anti-ethanol groups to highlight the evils of ethanol. All the while, corn farmers quietly continued to fund efforts to build meat exports for their top customers, the livestock industry.
Today, meat prices are surging mainly because of foreign market development which made us ready to take advantage of an increased global demand for protein. Corn prices are slumping mainly because of increased global grain production. It’s a good time to be in the meat and dairy business, and there are still opportunities for corn producers as well.
Many factors impact the prices we receive for our products, whether we produce grain, meat or energy. In Kansas, there are a number of agricultural producers have income streams from grain, ethanol, livestock plus oil or natural gas. In Kansas, we are fortunate to have good relationships across agriculture, and we treasure our friendships with those involved with livestock and other grains. But some ag groups have affiliations that are not as closely aligned with agriculture, like the Grocery Manufacturers Association and the American Meat Institute. Sometimes we don’t do a good job in sharing our collective influence on these groups when they provide divisive misinformation.
Truly, isn’t it a better business plan for those of us in U.S. agriculture to continue to work together make sure all sectors of agriculture are strong? Like the song from the musical “Oklahoma” says, “The farmer and the cowman should be friends; One man likes to push a plough, the other likes to chase a cow; But that’s no reason why they cain’t be friends.”
Jere White, Executive Director