Friday, May 20, 2011

The Alfalfa Ethanol Connection

My sheep like to eat.  During the Spring, Summer and Fall, they graze the grass growing on roughly 30 acres of our property.  And in the winter, they chow down on grass hay (made from one of our pastures) as well as on alfalfa.

Alfalfa is the name of a small leafy plant from the pea family that is grown for the nutritional value of its leaves.  Horses, sheep, cattle - they all love this stuff - it's like candy to them and it is an invaluable source of protein and calcium, which is why we feed it during the winter months.

 Over thousands of years, humans have bred sheep to produce twins and grow fleece at the same time.  This creates quite a draw on the body's resources and alfalfa helps to provide the additional nutrition during the last trimester of pregnancy and during the first 12 weeks of lactation.  Feeding alfalfa and grass hay to sheep during the winter months are considered an acceptable part of a grass fed program.

Unfortunately, the price of alfalfa has been sky rocketing this year.  At first glance, one might think that the higher cost of fuel is the culprit.  However this is only a small part of the equation.  Much more sinister forces are at work, namely the subsidization of ethanol.  Corn prices are sky high and so more acreage is being devoted to corn production.  This means that the demand for other grains is also increasing (the substitution effect) and those in turn are becoming more scarce and hence more expensive.  All this has trickled down to the hay and alfalfa markets.  2 years ago, I could get good alfalfa for $140/ton and this year it is heading north of $200/ton.  Raising livestock is not for the faint of heart!

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