Hurt: Energy Demand May Impact Feed Industry
Tuesday, May 23, 2006
The greatest fear for livestock producers is that energy prices remain high in coming years, and then a short corn crop occurs in 2007 or 2008, resulting in the need to drastically ration corn usage for feed, says a Purdue University Extension marketing specialist.
"The corn surplus will be gone with the 2006 crop, as expected total corn use may exceed production by about one billion bushels," says Chris Hurt. "Thus, the supply crunch year appears to be the 2007-08 marketing year.
"Of course, a weather-related small crop this summer could still bring the supply crunch and much higher corn prices this summer."
Hurt's comments came as he examined the relationship between agriculture and the energy industry. Agriculture, he noted, will be asked to contribute to the energy industry in a much larger way in coming years.
"Agriculture's traditional role as the foundation of the food industry will experience increasing competition as more corn is used for fuel," he said. "One of the largest of the groups this will impact is animal agriculture, which is among the biggest users of corn.
"Both crop and animal agriculture will face exciting new challenges to meet the growing demands that are currently being proposed. The next decade will be an exhilarating period for U.S. agriculture as it seeks the balance between food and fuel uses."
Hurt said the recent era of low-priced feed may well be over for the animal industries, especially for corn prices, but many uncertainties remain.
He said that the warning the livestock sector should remember is that when feed prices move to a new higher level, that likely will mean an initial period of losses, and sometimes severe losses, as herds and flocks are reduced.
"Then after perhaps one to two years, varying by species, retail prices and farm prices will move higher and positive returns can be generated even with the higher feed prices," he said.
"The strategic message is that managers in the livestock industry need to anticipate such a condition in the coming years, and more importantly, begin planning how to survive the transition years until product prices can eventually cover the higher feed prices."
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