Feeding Frenzy Factors

A look at the issues driving the markets and how they translate into the heart-fluttering feed bills horse owners now face.

Anyone feeding a horse today knows that hay and grain prices have surged to new heights.

The U.S. Dept. of Agriculture’s National Agricultural Statistics Service reported the national average price for alfalfa hay increased from $104/ton in 2005 to $138/ton in 2007, while corn increased from $2 to $4/bushel, and oats went from $1.63 to $2.50/bushel over the same time period. Following the release of the USDA’s March 31 Prospective Plantings report, the first official national indicator of farmers’ planting intentions for the year, corn prices immediately spiked to more than $6/bushel, a new record.

As these higher prices filter through the equine industry, striking feed manufacturers, feed retailers and horse owners, they ultimately affect our horse management decisions, whether sourcing reliable, quality hay or foregoing a show or new bridle in order to afford that hay.

Not surprisingly, the largest single driving force is the price of oil, which has risen sharply due in large part to increasing global demands coupled with supply concerns. Crude oil, $35/barrel in 2005 and $65 last year, has set one record high price after another, reaching more than $133/barrel as of press time. Nationally, gas price averages topped more than $3.88/gallon, which, adjusted for inflation, surpasses an earlier price spike in the ’80s. U.S. diesel fuel prices had already increased 36.5 percent to $3.38/gallon over the past two years as of February, and soared to a new record of $4.65 in May.

These unprecedented prices affect all aspects of the economy through increased production, supply and transportation costs, but they have a unique relationship with the country’s agricultural economy due to the ethanol factor.

“When you look at what’s happened to the ag sector in the past couple of years, the biggest thing is that ag has been tied to the energy sector,” said Chad Hart, an agricultural economist and head of Iowa State University’s Center for Agricultural and Rural Development’s Biorenewables Policy division. “Ethanol and biofuels have become major components in what’s going on in ag markets today.”

EtOH Stats

Fuel ethanol production has increased steadily in the United States since the 1980s, initially spurred by the desire to reduce energy dependence on foreign supplies following the oil embargoes of the 1970s.

The Energy Independence and Security Act of 2007, enacted in December, increased the nation’s Renewable Fuels Standard to 36 billion gallons of annual renewable fuel use by 2022 and requires that nearly 60 percent of the new RFS eventually be met by advanced biofuels, including cellulosic ethanol.
Cellulosic ethanol, which could theoretically be obtained through conversion of biomass ranging from trash to switchgrass to agricultural waste—instead of corn, our current main ethanol source—is promising but not yet commercially viable.