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Industry Warns Congress of GIPSA, RFS Consequences

by 5m Editor
30 June 2011, at 9:06am

US - The broiler chicken industry is under intense economic pressure from the rising cost of feed grains, much of which is caused by the federal government's ethanol programme, an industry leader told Congress yesterday.

Former National Chicken Council (NCC) chairman, Mike Welch, told the Senate Committee on Agriculture, Nutrition and Forestry in Washingotn yesterday: "Broiler companies have tried to weather the storm of very high, very volatile corn prices." Mr Welch is president and CEO of Harrison Poultry in Bethlehem, Georgia.

Proposed federal rules on the production and marketing of livestock and poultry have also put the industry under a cloud, he said.

He continued: "But now companies can no longer withstand the storm. They are trimming their production plans, which means growers will receive fewer chicks to grow to market-ready broilers, and processing plant work shifts are being reduced or even eliminated."

With less work time, more and more workers are being laid off, Mr Welch said. He noted that one company had to eliminate a second shift, and 300 jobs with it, while another company announced recently that it is cutting over 200 jobs due to the cost of feed. A third company was forced to file for bankruptcy and sell its assets to another firm, he said. The pressures are having repercussions on some companies, he said.

He added: "Banks and other lending institutions are telling troubled companies 'enough is enough', meaning sell your assets and repay your outstanding debt."

The crisis has come about largely because of the federal government's Renewable Fuels Standard (RFS), also known as the ethanol mandate, in which 40 per cent of corn production this year will be diverted from traditional uses, such as livestock and poultry feed, into the production of ethanol to satisfy the federal requirement that 12.6 billion gallons of ethanol must be blended into gasoline for motor vehicles.

Mr Welch said: "The RFS is essentially an immovable object even when there is an irresistible force." He said there is a shortfall in corn supplies but the RFS continues to be immune to the crisis in poultry and livestock. He called for a realistic trigger mechanism to adjust the RFS to market reality. The cost of corn has tripled since 2006 when the current RFS began seriously to influence the market.

He warned of the negative impact of the rule proposed by the US Department of Agriculture’s Grain Inspection, Packers & Stockyards Administration (GIPSA) that would place significant new restrictions on production and marketing of poultry and livestock.

"These new rules would devastate our industry by imposing over one billion dollars in cost over the first five years. The proposed rule should be withdrawn," Mr Welch said.