Ethanol, GIPSA pressures increase

by Bernard Shire
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Two major challenges currently facing the meat and poultry processing industry are the proposed new regulations from the US Dept. of Agriculture’s Grain Inspection, Packers & Stockyards Administration to drastically change arrangements between producers and processors, and the Environmental Protection Agency taking more corn away from animal agriculture production and putting it into the gas tanks of motorists.

Controversy over food, fuel
For a long time, there’s been controversy over the diversion of corn to the production of ethanol, and away from its use in feed for chicken, turkeys, livestock and hogs for poultry, beef, pork and other meat products. Corn prices already increased with USDA estimates that production this year was going to drop 3.5 percent compared to last year. With less corn available for animal feed, this will mean less meat and poultry product production, and this will lead to higher supermarket food prices, meaning higher food prices for consumers during a recession showing no signs of ending. One university agriculture study showed the corn crop next year must total 13.6 billion bushels. A recent Booz and Co. survey showed consumers are still spending less money on food.

Unfortunately, this controversy has been exacerbated even more with the decision by the EPA to increase the amount of ethanol in gasoline from 10 percent to 15 percent, through using corn originally designated for food animal production. The 15 percent ethanol in gasoline approved by EPA can be used in cars made in 2007 and more recently. To do this, EPA had to grant a partial waver of the Clean Air Act – a seemingly strange action for the Obama Administration to take – just with the idea of helping newer cars get slightly better gas mileage.

In response, a large group of food production and farm trade associations filed a lawsuit in federal court to overturn the EPA action, saying the federal agency exceeded its authority under the Clean Air Act, unlawfully interpreting the law to try and achieve a certain goal. Why would the Obama Administration twist the Clean Air Act to try and achieve this minimal goal, instead of waiting for environmentally sustainable biofuels to become available on the market to help drivers achieve better gas mileage? Critics claimed the hasty action was a political move to create appreciative voters before Nov. 2.

Agriculture Secretary Tom Vilsack announced renewable energy initiatives to help create a national biofuels industry that could help increase gasoline mileage. Vilsack said USDA is taking action to promote production of fuel from renewable resources while creating jobs and softening the effects of climate change. This will include developing a biofuels industry in every part of the US, including the use of USDA’s five Regional Biomass Research Centers. This plan would also include as many rural areas across the country as possible, to maximize the economic benefits and pull rural areas out from the effects of the current economic recession. This part of the plan focusing on research is good. Unfortunately, this BCAP plan will also resume making payments to eligible producers, furnish tax credits for biofuels and subsidize even more ethanol refineries, which will not be very beneficial to the food industry.

Ethanol, for quite some time, has had built-in supports. But that doesn’t help make sure people who may not be working can still put food on the table at home.

While dealing with the ethanol issue, the meat and poultry industry would be forced to pay out huge amounts of money if USDA’s GIPSA rules are adopted. A study released by the National Chicken Council shows the rules will cost the broiler chicken industry more than $1 billion as a result of higher costs for feed and housing, reduced efficiency, lost export sales and higher consumer prices. The rules would make big changes in the contractual and business relationships between chicken processors and independent growers, who grow the birds for the slaughterers and processors. There would also be major changes in the production and marketing system for cattle and pigs.

Thomas Elam, president of FarmEcon, the firm doing the study, said if passed, the rules would increase the costs of raising live chickens because the ability to pay growers based on their performance would be reduced.
 
Bernard Shire is M&P’s Washington correspondent, a contributing editor and a feature writer based in Lancaster, Pa. Shire also works as a food safety consultant and writer for Shire & Associates LLC.
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