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First Federal Agency Admits Ethanol Doubled Feed Costs

Government Accountability Office (GAO) Says Ethanol Doubled Feed Costs

Ethanol production more than doubled feed costs for livestock producers in the United States between 2006 and 2008, according to a report released Monday by the Government Accountability Office (GAO).

Livestock producers have long argued that skyrocketing feed costs were largely linked to increased ethanol production. The report by the GAO, however, is the first time that a government agency has issued a report agreeing with that stance.

The GAO report said that the rise of ethanol production was supported mostly by rising fuel prices that exceeded $4/gallon in 2007 and government subsidies to companies producing renewable fuels.

Officials in the GAO report said that up to 60% of corn grown in the United States before 2006 was used in beef, pork and dairy production. But by 2008, more than one third of corn in the United States was diverted to ethanol production plants concentrated in the Midwest where the majority of the corn is grown.

"Increased use of corn for ethanol has affected livestock producers by increasing prices for feed," the report stated. "In addition, livestock producers face reductions in land available for grazing."

Cropland used for pasture or grazing decreased by 41% from 2002 to 2007 as more land was gobbled up to grow corn for ethanol, according to USDA’s 2007 Census of Agriculture.

As a result of the growing use of ethanol for corn, hiking feed costs, many livestock producers have slashed breeding herds in an attempt to return their operations to profitability.

The U.S. Department of Agriculture (USDA) is forecasting that the value of U.S. livestock production will decline $11 billion or 8% in 2009 from the 2008 level. Meat production is also forecast to decline across all major categories in 2009 and 2010.

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