“Raising poultry and livestock as food for people is taking second place to putting ethanol derived from corn into America’s gasoline tanks,” said Bill Roenigk, NCC senior vice president and chief economist. “Because of an arbitrary federal mandate, larger and larger amounts of ethanol will be produced from the corn crop, and less will be used to feed the animals needed for America’s dinner plates.”
For the 2010/2011 crop year, which runs through September The World Agricultural Supply and Demand Estimates (WASDE) from USDA predict 5 billion bushels of corn will be used for feed and related purposes, while 5.05 billion bushels will be used for ethanol and byproducts. The report marks the first time that ethanol usage will exceed feed usage, Roenigk said.
Next year the disparity will grow as 5.05 billion bushels are used for feed and 5.15 billion bushels go into the ethanol category, USDA predicts. Ethanol will claim 37 percent of corn usage next year, USDA claims.
“USDA’s overall estimates of corn production are thought by many analysts to be somewhat optimistic,” Roenigk noted. “They expect that less corn overall will be produced. If that is correct, than even less corn will be available for poultry and livestock feed because the ethanol sector will always get enough to fulfill the mandate. Ethanol producers will always be able to outbid livestock and poultry producers because the fuel industry is required by law to buy ethanol.”
The mandated demand for ethanol has contributed to the increasing cost of corn, which now carries a price tag nearly three times as much as the cost five years ago, when the ethanol demand began to move the market, Roenigk noted. Chicken companies have spent more than $20 billion in added feed costs since then, he said.
WASDE accounts for the fact that the ethanol industry throws off a certain amount of byproducts, such as dried distillers’ grain with solubles (DDGS), which can be used as a feed supplement for livestock and poultry. However, it lacks the nutritional and energy values of corn.
“Producers would rather have corn, but since sufficient quantities are not available at reasonable prices, they will use some DDGS to try to stay in business,” Roenigk said.
The escalating price of corn, which is by far the largest single factor in the cost of producing a live chicken, is putting chicken companies under tremendous pressure, he said. One chicken company recently went bankrupt and sold its assets recently, contributing to consolidation within the industry, while others have announced production cutbacks and laid off workers, all because of the rising cost of production driven by the high cost of corn, Roenigk concluded.