Chicken Industry Urges Congress to Cut Ethanol Mandate

US - The chicken industry called on Congress earlier this week to slash the amount of ethanol required to be added to motor gasoline as a way of cooling the red-hot demand for corn that has driven the industry's biggest single cost to unprecedented highs.
calendar icon 15 April 2011
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Industry executive, Michael Welch, said on behlaf of the National Chicken Council at a hearing held by the Livestock, Dairy and Poultry Subcommittee of the House Agriculture Committee on 13 April: "The National Chicken Council (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."

Corn is the primary component of chicken feed, which accounts for 55 per cent of the wholesale cost of whole, ready-to-cook chickens. Corn has rocketed from about $2 per bushel in 2006 to more than $7.50 per bushel today, which Mr Welch said resulted largely from the fact that 40 per cent of the corn crop is being diverted into federally mandated ethanol usage. Ethanol makers benefit from the mandate, a tax credit on usage of ethanol, and a protective tariff on imports.

Mr Welch, who is president and chief executive officer of Harrison Poultry in Bethlehem, Georgia, and a former chairman of NCC, continued: "Mandating the use of ethanol, subsidising its cost, and protecting ethanol from competition is triple overkill."

Less than 700 million bushels of corn are expected to be left at the end of this crop year, he said, meaning there is virtually no margin for error in the crop to be harvested in the fall.

Mr Welch said: "There is no cushion, no extra bushels in inventory to carry the needs of the users of corn through the next crop year in the event of a shortfall in this fall's corn harvest. To assume an adequate number of acres will be planted to corn this year and the next few years and to further assume favourable weather conditions for crops this year and the next few years are not assumptions the US chicken industry is prepared to make, nor should prudent US government policymakers be willing to make."

He urged Congress to 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 warned: "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-subsidised buyers of corn."

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.

"More acres are needed, not just for corn, but also for soybeans, wheat, cotton, and other crops that compete with corn for acreage," he said.

On other topics, Mr Welch said the US Department of Agriculture should withdraw the widely criticised rule proposed by its Grain Inspection, Packers & Stockyards Administration (GIPSA) on the relationship between poultry companies and the farmers who produce chicken under contract to them. The rule also covers meat-packers and cattle and hog producers.

Mr Welch 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. The rule would put the US chicken industry at a global disadvantage, as other countries would not have to face these onerous requirements, and create uncertainty and cause unnecessary and costly regulatory and legal burdens in the marketplace by making it much more difficult for companies and contract growers to get competitive financing."

He said USDA should revise the rule to more closely track the intent of Congress as expressed in the 2008 Farm Bill.

He also urged Congress to approve 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.

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