Renewable fuels boom creating cattle industry growth opportunit

Growth potential is there; Can cattle industry members cash in?

By Jeff Caldwell

The numbers don't lie.

Regardless of whatever argument over the environmental regulation of the livestock industry is taking place at the Iowa statehouse, the economic factors send a clear signal. Because of the conditions created by the growing renewable fuels industry, the livestock sector--especially beef cattle--is poised for growth. Can the cattle industry respond, turn growth potential into growth realized and restore Iowa as the leading cattle-feeding state in the U.S.?

Cattlemen, industry representatives and others discussed this potential during "Growing Iowa's Cattle Industry: Ethanol, Opportunities and Economic Development," June 5 at the Iowa Farm Bureau Federation headquarters in West Des Moines, Iowa. The event was organized by Iowa State University Extension and co-sponsored by the Iowa Corn Growers Association, Iowa Farm Bureau, Risk Management Agency, Professional Developers of Iowa, Iowa Area Development Group, Iowa Cattlemen's Association and Iowa Renewable Fuels Association.

The crowd for the event, the first of its kind in Iowa, was large--around 200--and spilled into a room adjoining the auditorium hosting speakers and guests. If attendance was any indication, interest in expanding Iowa's cattle industry is high. And at this juncture, such sentiment is justified, according to ISU Extension vice provost, Jack Payne.

"It's an exciting time for agriculture and the cattle industry. Iowa is unique among beef-producing states. We're among a few states that has all the ingredients to grow high-quality cattle," said Payne, who's held his current position at ISU for around four months since his arrival here from Utah State University, where he held the same position. "We may be on the eve of an agricultural renaissance."

'Why Iowa? Why now?'

Between the years of 1968 and 1972, Iowa was the number-one cattle-feeding state in the nation, with 18 percent of the total U.S. fed cattle inventory. Then began a change, driven by a number of factors, that has since dropped Iowa's feeder cattle numbers, according to John Lawrence, lSU Extension livestock economist and director of the Iowa Beef Center. Among those factors are changes in economic scales, production technology and regulation, but most notable was a shift in consumer demand accompanied by a geographic shift for the epicenter of production driven by production costs, Lawrence said. Yet, in the last eight years, this decades-long trend, at least when it comes to consumer demand, has been reversed.

"We saw a shift in emphasis from Iowa corn-fed beef to leaner beef that the consumer demanded at that time," he said. "The world is changing again. There is a rise in quality beef demand, the type I'd like to think Iowa specializes in. This is important to recognize."

But, this shift in consumer behavior isn't driving a potential cattle renaissance in Iowa. The ethanol industry is. Twenty-five facilities currently have an annual production capacity of 1.5 billion gallons. With one bushel of distillers grain (DG)--the co-product of the ethanol refining process--created for every 2.65 gallons of fuel, the protein-rich material is plentiful. What's more, according to ISU Extension beef specialist and IBC staff member Dan Loy, the material often mistakenly referred to as a "by-product" is actually a strong source of nutrition.

"Distillers grains are superior nutritionally to corn grain," Loy said June 5. "High levels of distillers grains can be fed if economics dictate."

The mountains of ethanol co-products piling up outside ethanol plants around the state, combined with today's high energy costs, comprise the driving force behind an Iowa cattle resurgence.

"Co-product availability plus high energy costs, like that to irrigate, are having major impacts," Lawrence said. "The world is beginning to change. The question is now can Iowa take advantage of that?"

Distillers grain

as a feed source

With such a mammoth ethanol production capacity in Iowa, the growth of which shows no sign of slowing anytime soon, a tremendous potential feedstock exists in the distillers grain produced in the ethanol-refining process. According to Lawrence, for every 45 million gallons of ethanol production capacity, 395 tons of distillers grain is produced on a daily basis, tallying up to more than 144,000 tons per year.

How does this translate to a cattle feedstock? Lawrence said, if feeding a 15-percent co-product ration, it would take 224,089 animals to consume the distillers grain produced at current levels; At a 30-percent ration, it would require 112,044 head; and with a 40-percent ration, 84,033 head.

Besides these demographics, Lawrence said other figures outside the feeding sector specifically bode well for an increase in Iowa feeder cattle.

"U.S. cattle numbers are increasing. And, there is growing beef demand," Lawrence said. "Iowa has always been a low-cost producer of commodity beef.

"We have an event that could significantly change agriculture when we have this much ethanol production."

While Loy said DG definitely does offer value in feeding cattle, there are challenges presented when relying upon the grain as a feed source. But, these challenges, to this point, are not insurmountable.

"You can add value to distillers grains and still produce high-quality cattle feed," Loy said. "The challenges in feeding ethanol co-products are manageable. Economics will drive use and inclusion levels."

Some questions remain about the feeding characteristics of DG, however, according to Loy, mainly pertaining to rationing DG. Research in this arena is ongoing.

"How much can we feed? We know we can feed 50 percent dry matter. What about 60 percent or 70 percent?" Loy said. "How different are the nutritional properties of specific co-products, like low-oil, low-protein, modified moistures and mixtures? Are there feed combinations that work best? Can variation in some nutrients be reduced?"

Cattle feeding as

economic development

The beef cattle feeding sector surprisingly has no state structure for economic development similar to other industries. As such, the specific impact on the state's economy is not known, and this lack of knowledge is a hurdle industry members must pass in order to be considered a larger part of the economy of Iowa, according to Mike Meissen from the Iowa Area Development Group. Meissen said it's important industry members grasp the numbers for their impact on the economy.

"The impact of one dairy cow in one area is $13,700 a year. So, when we put in a 1,000-head dairy, that's a $13.7 million impact," he said. "These numbers exist in the beef industry. The only people who don't know these numbers are the producers and the people in town.

"You need to know your industry. When you go to a county board of supervisors meeting and say how you're going to help your county, you need to know your own industry. You need to know how much you're going to help your county."

One way to simply measure the economic impact of a cattle feeding operation is on a per-head basis: For every 1,000 feeder cattle, one full-time employee is required, while a full-time employee is needed for every 300 cows. Based on current statewide numbers, this equates to 6,000 jobs, with an additional 10,000 jobs indirectly related to the industry.

Yet, despite this economic impact today--and its potential jump with the expansion of the cattle-feeding sector in the state--many Iowans remain unfamiliar about the industry's true influence on the state. As a result, Meissen said industry awareness, and educating others outside the industry, may be of utmost importance in the expansion of beef production in Iowa's future.

"You just need to know your industry. We are all entitled to our own opinions, but not our own facts," he said. "If you get all the facts, and you still don't want production agriculture, so be it. But, you need to know the economic impact first."

Jeff Caldwell can be reached by phone at 515-280-5405 or by e-mail at jcaldwell@mchsi.com.

Date: 6/21/06

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