Subsidized ethanol has meant record high corn prices, record-high costs of production for meat and poultry, resulting in lower per capita meat and poultry output and, finally, record-high meat prices, said Steven Roger Meyer, Ph.D., president Paragon Economics Inc.
“The US pork industry lost $6 billion in equity from 2007 through 2009 but improved profitability did not stop the exodus of pork producers in 2010,” Meyer said in his prepared testimony. “From 2007 through 2010, 6,350 hog operations exited the industry and 84 percent of them held 500 of fewer hogs in inventory. During that same five years, 30,510 cattle and calf operations and 24,350 beef cow operations exited the industry. The vast majority of these closures, too, was among small operations.”
Ted Seger, a turkey producer and president of Farbest Foods Inc. in Huntingburg, Ind., testified, “It is hard to believe the federal government would entertain such a venture when it is having trouble paying its bills and would put another taxpayer funded program on the books.”
Michael Welch, president and CEO of Harrison Poultry in Bethlehem, Ga., insisted no issue is more critical than having an adequate supply of grain and oilseeds at reasonable costs.
“The rules of the game should be re-balanced and the playing field should be leveled to permit chicken producers and other animal agriculture producers to more fairly compete for the limited supplies of corn this year and in the next few years,” he added. “Included in this effort must be a safety-valve to adjust the Renewable Fuels Standard when there is a shortfall in corn supplies.”
Randy Spronk, a pork producer and managing partner of Spronk Brothers III LLP and Ranger Farms in Edgerton, Minn., said: “Where mandates and subsidies are allowed to exist, it is unconscionable that long-established laws would be ignored to drive greater ethanol production. But this is the path the Obama administration has taken in response to demands to allow an increase to 15 percent [E15] from the current 10 percent in the amount of ethanol that can be blended into gasoline.”
Almost every member of the Subcommittee agreed with what the witnesses said. Congressman David Scott (D-GA) asked the panel how high the price of corn would have to be to force them to stop their operations. Prices are already too high and cannot be sustained in the long term, Welch replied. If the price of corn remains this high, he added poultry prices would have to increase 20 percent to break even.
When Congressman Reid Ribble (R-WI) asked what changes to federal policy the panel would suggest to help this problem, all agreed reforming the Renewable Fuel Standard is the only way to end the high demand on corn.