Livestock Menus Expand To Include Ice Cream, More Grass

1:54 PM, July 31, 2008

By Rebecca Townsend

Of DOW JONES NEWSWIRES

Agriculture Online

CHICAGO (Dow Jones)--Corn is showing up in more livestock feed again as

prices retreat from record territory, but the grain may now be sharing menu

space with more alternative sustenance -- from grass to ice cream.

The ice cream industry, for instance, has discovered a niche market among

dairy and pork producers for the hundreds of gallons of waste ice cream that

are produced at the beginning of each new batch.

After cash prices for corn and soybeans reached record levels last month,

they've dropped 25% and 14%, respectively, U.S. Secretary of Agriculture Ed

Schafer said Tuesday when he announced that the federal government would not

allow penalty-free release of acreage from the Conservation Reserve Program.

The CRP encourages farmers to keep highly erodible or environmentally sensitive

acreage idle by paying farmers annual rent payments over the term of a

multiyear contract.

Earlier efforts by the USDA to open CRP ground for haying and grazing

activity this year were recently stalled by a federal judge, but an agreement

reached last week clears the way for thousands of landowners to proceed with

plans to utilize their CRP for forage.

Schaefer said despite severe, localized crop problems related to June floods

in the U.S. Midwest and sub-par planting conditions, the U.S. is generally

expected to harvest the second-largest corn crop ever this fall. That bonanza

should ease the margin pressure currently squeezing the profit out of livestock

production.

December corn futures on the Chicago Board of Trade closed at $6.21 1/4 a

bushel on Wednesday, while November soybeans ended at $14.05 a bushel.

Still, the severe financial discomfort endured over the past several months

will likely result in some long-term adjustments.

"Anticipation of more late-season forage probably kept some calves out the

feed lot," said Chris Hurt, a Purdue University Professor of agricultural

economics, noting delayed feedlot placements will likely move for final

fattening in later December.

While he doesn't think the margin squeeze will force droves of conventional

feeders to embrace grass as a corn alternative, Hurt said cattle producers will

continue to check wheat's competitiveness. Corn has largely regained its

advantage in the Eastern Corn Belt, but Hurt pointed to at least three

locations in southern Indiana where wheat held the advantage. And, he said, he

talked Wednesday with a Southern Illinois grain manager who said that livestock

feeders did buy some wheat to feed.

"My prices show that there was a harvest phenomenon where the greatest

financial incentives to feed wheat were from Mid-June to mid-July," he said.

"The peak for Southern Illinois and Southern Indiana was in the first week of

July where wheat was more than $1.00 per bushel cheaper for feeding than was

corn, assuming that wheat has a nutritional value about 10% greater than corn."

While wheat is not a total substitute for corn - feeders may substitute only

20% or so of the corn in the ration - Hurt said that wheat feeding has reduced

corn feeding this summer, but to what extent is still not clear.

"Corn-based ethanol and increasing global demand (have) the entire animal

protein industry upside down in a way it's never been before, and none of us

know where it's going," said Will Harris, of White Oak Pastures, a grass-fed

beef production and slaughter operation in Bluffton, Ga.

"It's not as if (high-priced corn) is a boon to grass-fed; it's not," said

Harris.

Grass-fed cattle operations demand a lot of land, and with land and cash

rents becoming more expensive, some farmers opt to sacrifice their pastures to

cash in on tempting grain prices, thereby increasing competition for the

remaining pasture.

Grazing consultant Jim Gerrish said, however, he's been turning away more and

more business, as tighter margins fuel interest in the growing

grass-fed-and-finished beef niche.

"I see it really all across the U.S., farmers and ranchers who are getting

more interested in pasture finishing cattle as an alternative to the feedlot,"

said Gerrish, of American GrazingLands Services. "That's been growing for

several years and high corn prices have pushed some guys over the edge who had

been waiting."

Gerrish pioneered "managed intensive grazing" production systems, which treat

pasture forages as manageable crops capable of economically competing with corn

as a feed input. "Of the new clients I've taken on in the last year, at least

two-thirds are either on-going grass finishers or that is their goal," he said,

noting he aims to help his producers mirror the select-to-choice grading ratio

of conventional feedlots.

One of Gerrish's clients, Race King, general manager of La Cense Montana said

the ranch's cost of gain for grass-fed cattle is two-thirds that of the

grain-fed operation.

It's impossible to gauge the percentage of beef operations committed to grass

because farmers who direct-market their products are not compelled to report

their numbers to any central data-collection entity.

Beyond grass and wheat, high corn prices have expanded interest in the dried

distillers grain, which is a byproduct of corn-based ethanol production, as

well as grain sorghum and other less obvious alternatives.

The ice cream industry recently has learned some lessons about feeding

livestock.

"Dairy cows will eat nuts; for hogs we have to screen them out," said Michael

Carroll, environmental manager at an Eddy's Ice Cream plant in Fort Wayne, Ind.

While it remains to be seen if corn prices will retreat further this fall, a

livestock producer's flexibility to adjust rations has left a lasting

impression on Steve Markham, senior merchandiser of DDG provider Cenex Harvest

States. One of his turkey producers, for instance, maintains 32 feed bins

including such ration balancers such as waste cereals, DDGs, gluten feed,

soymeal and canola meal, he said.

-By Rebecca Townsend, Dow Jones Newswires

agriculture.com