Biofuel Policy and Drought Impacts on the U.S. Grain and Livestock Markets

Authors

Sunil P. Dhoubhadel, University of Nebraska-LincolnFollow
Azzeddine Azzam, University of Nebraska-LincolnFollow
Matthew C. Stockton, University of Nebraska-LincolnFollow

Date of this Version

2013

Citation

Cornhusker Economics (September 11, 2013)

Comments

Published by University of Nebraska–Lincoln Extension, Institute of Agriculture & Natural Resources, Department of Agricultural Economics. Copyright © [2014] Board of Regents, University of Nebraska. http://agecon.unl.edu/cornhuskereconomics

Abstract

With the rapid increase in the production of biofuels in the United States, especially corn based ethanol, the ethanol industry has emerged as the livestock and poultry industry’s largest single competitor for corn, the predominant source of feed for cattle, hogs and poultry. As a consequence of this competition, corn prices have dramatically increased. Higher corn prices affect profitability of the livestock and poultry enterprises, as 60 to 70 percent of their variable costs are feed costs. Ethanol production, however, also has a positive effect on livestock production in the form of distiller grains (DG). DG is a by-product of ethanol production and is increasingly used in animal feeds. This fact helps to partially offset the effect of higher corn prices on livestock and poultry production.