Ethanol’s Demand for Corn May Trim US Meat Output

The ethanol market’s hunger for corn has driven up corn prices and livestock analysts believe if corn prices continue rising, US cattle, hog, and chicken producers will cut production and that could trim meat supplies and possibly mean higher meat prices in 2007 or later.

“The whole ag industry is starting to become aware of what ethanol plant construction means to the future. It gives us an outlook of ever higher corn prices for as far as we can see,” said Ron Plain, a University of Missouri agricultural economist.
As a result, Plain said livestock producers will likely have to reduce production.

“Longer term the livestock industry is not going to go away, we will just find a new equilibrium. In my mind, the new equilibrium is going to be with fewer hogs, fewer chickens and fewer cattle than we had planned on,” said Plain.

“We cannot afford to pay the feed prices that are coming at us given the current prices of meat,” he said.

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