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Ohio facilities' hunger for crop is boon for growers, but high price of feed will put strain on hog farmers, consumers
Published on Thursday, May 22, 2008
Columbus Dispatch
At corn-planting time last year, Ohio farmers weren't planning to sell their crop to in-state ethanol plants because there weren't any. But that's changed.
Now, Ohio — which had lagged other top corn-growing states in ethanol production — has five plants in operation. Two more are slated to open by the end of the year.
The development is a good one for Ohio's corn farmers, who will have another market for selling their crop. But others, such as hog farmers, are worried about their livelihoods as demand for corn from the quickly expanding biofuels industry increases feed prices.
In the end, consumers will foot the bill for the rising price of producing pork and other products.
The ethanol plants are just making their debut in Ohio, but the state has touted their importance for several years. Critics said the process was slowed by a lack of incentive programs and an arduous system for receiving environmental permits. State officials attribute the delay to other states' abundant crops and lower corn prices.
Whatever the reason, ethanol production has arrived and is ''going to transform Ohio's corn usage,'' said Dwayne Siekman, executive director of the Ohio Corn Growers Association.
In the past, Ohio has shipped 60 percent of the corn it produces out of state, including 10 percent overseas. Siekman predicted that the new ethanol plants will keep more corn in the state.
Having another place to sell the crop could lead to higher pricing, Siekman said.
When Ohio's seven ethanol plants are operating at full capacity, they will use 182 million bushels of corn per year to produce 514 million gallons of ethanol. Last year, Ohio's corn crop was 541.5 million bushels.
''That's obviously significantly increased demand for crops grown in the state of Ohio,'' said Doug O'Brien, assistant director of the Ohio Department of Agriculture.
Typically, farmers within 30 miles of an ethanol plant are paid a premium of 5 cents to 15 cents per bushel, said Matt Roberts, an Ohio State University Extension agricultural economist.
Roberts noted, however, that the benefit of having the ethanol plants in
Ohio is not as important to farmers as high corn prices overall.
Corn has been selling at Ohio grain elevators for about $5.50 per bushel. So being paid a few cents more per bushel by an ethanol plant does not make as much difference as it would have a few years ago, when cash corn prices were much lower, Roberts said.
The prices of corn, soybeans and wheat have been climbing for some time. Several factors are playing a role, including demand for biofuels, investment by speculators, a worldwide wheat shortage and the weak dollar.
Critics say using grain to produce alternative fuels is helping to drive up food prices and exacerbate world hunger. Ohio's corn growers dispute that point.
The state's ''corn is not a food crop. It's a feed crop,'' Siekman said.
Rising feed prices
Hog farmers are all too aware of that. As grain prices have continued their upward trajectory, the cost of feeding pigs has doubled over the past seven months, said Bryan Black, a board member of the National Pork Producers Council and a Canal Winchester farmer.
A hog that sells for $120 now costs $150 to $170 to produce, meaning farmers are losing money on each animal. In the pork industry, because of the many steps involved before products reach grocery shelves, it can take several months before farmers receive prices that reflect their increased costs, Black said.
He said industry analysts predict that the price of pork in grocery stores eventually will rise by 17 percent to 20 percent to offset producers' cost increases.
The U.S. Department of Agriculture said this month that it will purchase up to $50 million of pork products to aid the industry, reducing supply to boost prices.
Smaller harvest
Hog farmers are particularly concerned about ''physical availability of corn,'' Black said. Nationwide, farmers are planting less corn this year, and farmers in the Midwest are behind on planting the crop because of wet weather.
Last year, Ohio farmers hauled in a record corn harvest. This year's planting is expected to decrease by 500,000 acres, to 3.35 million acres. Ohio soybean acreage, meanwhile, is expected to increase by 350,000 acres, to 4.5 million. Corn is more expensive to grow than soybeans, although soybean prices also have risen dramatically.
About half of the state's corn crop had been planted as of May 11, the most recent data available, compared with 74 percent at the same time last year, according to the National Agricultural Statistics Service.
The delay largely affects northwestern Ohio, Siekman said. Most farmers in central and southern Ohio have planted their corn crop.
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