Corn supply outlook puts ethanol in the hot seat

Sep 16, 2011

The House Committee on Agriculture’s Subcommittee on Livestock, Dairy and Poultry discussed the issue of feed availability and its affect on the livestock and poultry industries during a hearing last week. The debate stemmed primarily around the ethanol vs feed controversy, with the majority of the testimony centered around the recent USDA’s World Agriculture Supply and Demand Estimates report projecting this year’s corn crop to be 417 million bushels lower than expected.

Representatives from the National Cattlemen’s Beef Association, National Pork Producers Council, National Turkey Federation, National Chicken Council and the American Feed Industry Association testified.

“While U.S. corn usage for food and industrial purposes other than ethanol have remained relatively constant since 2008, the amount of corn used for ethanol has increased eight-fold, with three-quarters of that increase occurring since 2005,” said Steve Meyer on behalf of NCBA. Meyer is president of Paragon Economics, a livestock and grain marketing and economic advisory company in Adel, Iowa. “I realize we cannot ‘un-ring the bell’ on ethanol subsidies and tariffs but subsidized ethanol has meant recordhigh corn prices and recordhigh costs of production for meat and poultry resulting in lower per capita meat and poultry output. If you hear from anyone that the government should not be deciding on winners and losers, please realize that you have already done so.”

While this corn debate of feed vs ethanol is far from new, the latest USDA Supply and Demand report has the livestock industry coming out on the short end.

With a reduction in yield estimates of more than 400 million bushels, supplies are going to very tight.

The House Agriculture Subcommittee on Livestock, Dairy, and Poultry is considering the concerns of livestock and poultry producers about feed availability and their claims that ethanol is to blame. However, Matt Hartwig with the Renewable Fuels Association says the ethanol industry will produce almost 40 million metric tons of livestock feed this year in the form of distillers grains, which he says is not accurately reflected in supply and demand statistics.

As livestock producers have approached Congress about the feed availability issue and raised the food versus fuel flag again, Hartwig encourages lawmakers to look at more than just the price of corn.

Hartwig adds that adverse weather conditions, market speculation, monetary policy and global demand are all contributing to tighter grain supplies and higher prices, but he believes the productivity of farmers is continuing to meet demands for food, feed and fuel.

USDA’s report accounted for a 100 million bushel reduction in ethanol use, but during the hearing, the common denominator with everyone that testified was that their needed to be a new balance between corn for ethanol and corn for feed.

“There is an immediate and legitimate concern about the availability and cost of feed ingredients due to the mandated use of corn-based ethanol. It has become clear, from the minute the government chose to subsidize corn as an energy source, that livestock and poultry interests have taken a back seat to the ethanol industry,” Ted Seger, president and part owner of Farbest Foods Inc., and past chairman of the National Turkey Federation.

“While no one item is a silver bullet to fixing the low corn stock problem, we must do something to protect livestock and poultry producers from excessive high corn prices due to the fact that the government has mandated the use of half of the corn supply into the nation’s fuel supply. The Volumetric Eth anol

Excise Tax Credit, or blender’s credit, is not required to support ethanol production and should be allowed to expire at the end of the year. Also, the Renewable Fuel Standard (RFS) should be reevaluated by creating a policy that provides a practical, automatic and meaningful safety net to protect against a poor corn,” he said. —Traci Eatherton, WLJ Editor