The Livestock – Biofuels Connection
Illinois’ Value-Added Ag Businesses are Booming

The growing popularity of renewable fuels is strengthening the natural synergy that exists between the Illinois grain and livestock industries. Increasing Illinois biofuels production is boosting the local availability of feedstuffs, byproducts of fuel production. That benefits livestock producers, while grain producers profit from both the biofuels market and the feed market.

 

In recent months, sky-rocketing petroleum oil prices have become the centerpiece of many consumer concerns, shifting their focus to the merits of corn-based ethanol and soybean-based biodiesel fuels as part of the answer. And not only do renewable fuels producers and corn and soybean farmers benefit from the booming biofuels business, increasingly the Illinois livestock industry is reaping rewards from the connection.

 

“Biofuels and livestock need each other to be successful in the future.  Biofuels will need to get rid of the mountain of byproducts in a way that is economical for their business. Livestock will need a reliable, quality feed supply to continue to meet world demand for meat production,” said Gary Asay, pork producer from Osco, Ill., and president of the Illinois Pork Producers Association (IPPA).  “Rather than shipping the byproducts around the world, let’s add value to those products by feeding them to livestock here in Illinois and then ship the meat to consumers around the world.”

 

The Illinois livestock industry – often considered the original “value-added” agricultural industry, turning commodity feeds into meat – consumes nearly 120 million bushels of corn and about 40 million bushels of soybean equivalent each year.  With growing ethanol and biodiesel production in the state, the byproducts of these renewable fuels production processes are more readily available for local livestock feed use.

 

“Synergies can be drawn between the ethanol, corn and livestock industries,” said John Kuhfuss, ICGA president from Mackinaw, Ill.  “Given high transportation costs, the availability of DDGS (dried distiller’s grains with solubles) could add momentum to revived interest in expanding the Illinois livestock industry.”

 

The Illinois Livestock Development Group (ILDG) recognizes the value of the byproducts of renewable fuels production, which include the meal from crushed soybeans and DDGS from corn.  Generally, for every bushel of corn made into ethanol, 18 pounds of DDGS are created and available for local feed.  Every bushel of soybeans yields 48 pounds of meal and 11 pounds of oil when it is crushed.  The oil is used in biodiesel production, and the meal is available for feed.

 

That is good news for pork producers and consumers, in general. The pork industry alone contributes more than $1.9 billion annually to the state’s economy, in addition to generating more than $176 million in taxes and supporting 18,500 jobs.  Altogether, the livestock industry generates $3.43 billion in economic activity, $334 million in state tax revenue and employs around 45,000 people.

 

All indications are that renewable fuels production will continue to increase.  According to the Illinois Corn Growers Association (ICGA), six ethanol plants are in operation in the state, two are under construction and about 20 are under review and development.  Illinois currently has the capacity to produce almost 900 million gallons per year.  In total, the U.S. produces more than 4.3 billion gallons of ethanol annually.

 

Biodiesel production, too, is beginning to see promising growth in Illinois.  The largest biodiesel production facility in the state produces 22 million gallons per year.  Four new plants are under discussion, and could be built in Illinois during the next 12 to18 months.

 

“Illinois provides a conducive environment for biodiesel production, given our state and federal sales tax incentives, more than any other state,” said Bill Dumoulin, Illinois Soybean Association (ISA) representative to the ILDG.  “Five years ago, there were few biodiesel production plants in the U.S. with no measurable production.  In 2004, nationwide production was 25 million gallons, that tripled to 75 million in 2005 and 150 million gallons or more are expected to be produced this year.”

 

“The more we can feed local livestock, the better the news for corn, soybean and livestock producers,” added Dumoulin.  “One of the long-term strategies of supporting value-added agricultural industries is to help bring livestock back to Illinois.  As we produce more biodiesel (and ethanol), we create more protein sources for livestock, and we can find new ways to collaborate between these value-added industries.”

 

Value-Added Agriculture Factoids

  • In 2004, Illinois pork operations produced 1.73 billion pounds of pork, ranking Illinois fourth among all states.  Cattle and calf production during 2004 totaled 560.6 million pounds, placing Illinois 18th in total U.S. marketings.
  • Livestock and livestock products cash receipts in Illinois in 2004 totaled 1.9 billion dollars, which was up 8 percent from 2003.  Hogs accounted for 10.6 percent of total cash receipts, while cattle and calves accounted for 5.0 percent and dairy products accounted for 3.2 percent. Compared to 2003, cash receipts rose 23 percent for hogs, 25 percent for dairy and declined 20 percent for cattle.
  • Illinois livestock numbers have fallen during the last decade – a trend the Illinois Livestock Development Group is working to reverse.  About 5.35 million hogs were inventoried in 1994 in Illinois compared with just over 4 million in 2005.  Likewise, the beef cattle inventory fell from 1.74 million to1.34 million and the number of dairy farms dropped from 2,300 farms to about 1,400. 
  • The U.S. Meat Export Federation estimates that more than 235 million bushels of corn and 45 million bushels of soybeans were exported through U.S. red meat exports in 2005.  By 2007, U.S. red meat exports will account for the use of more than 350 million bushels of corn and 52 million bushels of soybeans.
  • Illinois ranks second in U.S. corn production with more than 1.7 billion bushels produced annually.  Corn grown in Illinois is used to produce 40 percent of the ethanol consumed in the United States.
  • Illinois generally ranks first or second in total soybean production.  Nearly 450 million bushels of soybeans were produced in 2005, representing about one-sixth of total U.S. production. Soybeans are used in food, feed and industrial uses.
  • During the 2005 calendar year, a total of 7 million gallons of Illinois-produced biodiesel were sold in the state. Various biodiesel blends currently are available at more than 100 retail pump locations throughout Illinois.
  • Nationwide, biodiesel sales in 2005 hit a record level of 75 million gallons. The annual production capacity of existing U.S. biodiesel plants totals 395 million gallons per year.
  • In the U.S., 65 companies have invested millions of dollars in the development of manufacturing plants and currently are marketing biodiesel fuel. Fifty companies have plants under construction, and another eight are expanding existing operations.
  • According to a 2001 U.S. Department of Agriculture study, an average annual increase of the equivalent of 200 million gallons of biodiesel fuel demand would increase total cash crop receipts by $5.2 billion by 2010. The ultimate impact: an average net farm income increase of $300 million per year.
  • Ethanol production consumed some 1.4 billion bushels of corn in 2004. Studies have shown that corn prices in markets near ethanol plants will increase between five and eight cents per bushel.
  • According to the U.S. Department of Agriculture, ethanol production adds 30 cents to the value of a bushel of corn. The Renewable Fuels Association notes that ethanol production adds $4.5 billion to U.S. farm income annually.
  • More than one-third of the United State’s current trade deficit is the result of petroleum imports. Some projections indicate petroleum’s portion of the trade deficit could rise to more than 60 percent of the U.S. trade deficit over the next 10 to 20 years.
  • The U.S. balance of trade has been aided by ethanol’s displacement of imported petroleum in recent years. A 1997 Kellogg School of Management study found ethanol production improved the trade balance by $2 billion that year alone.
  • American consumers stand to save money by pumping more ethanol. According to a May 2005 Consumer Federation of America report, fuel consumers could save up to eight cents per gallon if fuel sellers would simply add more ethanol to their fuel blends instead of purchasing additional imported petroleum.