US chicken industry: Cut ethanol mandate
April 18, 2011
by Meat&Poultry Staff
WASHINGTON – Last week, the US chicken industry asked Congress to slash the amount of ethanol required to be added to motor gasoline as one way to stem the growing demand for corn, which has driven industry’s biggest single cost to unprecedented highs, according to the National Chicken Council (NCC).
“The NCC recommends a plan be implemented that would reduce the Renewable Fuels Standard when the stocks-to-use ratio for corn drops to low levels, as the situation is now,” said Michael Welch, president and CEO of Harrison Poultry, Bethlehem, Ga., and former NCC chairman, on NCC’s behalf at a hearing held by the Livestock, Dairy and Poultry Subcommittee of the House Agriculture Committee.
As the primary ingredient of chicken feed, which accounts for 55 percent of the wholesale cost of whole, ready-to-cook chickens, the cost of corn has increased from about $2 per bushel in 2006 to more than $7.50 per bushel. This increase has resulted largely because 40 percent of the corn crop is being diverted into federally mandated ethanol usage, he said. Ethanol producers benefit from the mandate, a tax credit on usage of ethanol and a protective tariff on imports.
“Mandating the use of ethanol, subsidizing its cost and protecting ethanol from competition is triple overkill,” Welch said. Less than 700 million bushels of corn are expected to be left at the end of this crop year, he added, meaning there is virtually no margin for error in the crop to be harvested in the fall.
Congress should adopt a contingency plan or “off-ramp” from the Renewable Fuels Standard, which is the law requiring that a fixed amount of ethanol be added to motor fuel every year, he urged.
Unless there are perfect crop conditions this year to plant, grow and harvest a record quantity of corn, animal agriculture will experience major disruptions while ethanol producers will continue to outbid non-subsidized buyers of corn, Welch warned.
The mandate should be reduced to allow non-ethanol users greater access to corn, he said. Farmers should also be allowed to withdraw non-environmentally sensitive acres from the Conservation Reserve Program without penalty.
The US Department of Agriculture should withdraw the widely criticized rule proposed by its Grain Inspection, Packers & Stockyards Administration (GIPSA) on the relationship between companies and the farmers who produce chicken under contract to them, Welch said. USDA should revise the rule to more closely track the intent of Congress as expressed in the 2008 Farm Bill, he added.
“The rule as proposed would cost the broiler industry over $1 billion during the first five years, and further, would change the way companies and growers do business that has been successfully conducted for more than five decades,” Welch said
Proposed trade agreements with Colombia, South Korea and Panama, which he said would boost US poultry exports to those countries from a combined $74 million to $225 million, should also be approved by Congress.