Archive for the ‘Ethanol’ Category

Chicken Farmers and Companies Hit Hard by Corn Prices, Council Tells Congress

September 14, 2011

WASHINGTON – September 14, 2011 — Family farmers and chicken companies alike have been hit hard by the skyrocketing price and short supply of corn, a spokesman for the National Chicken Council told Congress today.

“USDA’s report earlier this week confirmed that it will be much more difficult this crop year to secure an adequate supply of feed ingredients that can be procured at a cost that is both manageable and predictable,” Harrison Poultry chief executive Michael Welch told the Livestock, Dairy and Poultry Subcommittee of the House Committee on Agriculture here Wednesday. “The more than 40 vertically integrated chicken companies that comprise the broiler industry have financially struggled for the past four calendar quarters. Broiler companies have increasingly been squeezed throughout the past corn crop year between rising feed costs and declining prices for chicken products. A number of companies have succumbed to the severe cost/price squeeze by ceasing operations or having to sell their assets at fire-sale values.”

Welch said much of the squeeze results from the enormous, government-mandated demand from the ethanol industry, which will take around 40 percent of this year’s corn harvest to supply the 12.6 billion gallons of ethanol required by federal law to be blended into motor gasoline this year.

The situation is particularly hard on the family farmers who raise chickens under contract with the poultry companies, said Welch, a long-time industry executive and former chairman of NCC.

“I have outlined several critical problems, but none is more paramount than the very unfortunate situation being forced on the family farms who have lost, or are now losing, their contracts to grow broilers,” Welch said. “Disrupting or ceasing the financial flow generated by the contract payments results in not just the broiler operations being jeopardized, but in many cases results in the entire family farm being put in jeopardy.”

“I suggest that if you ask these family farmers if current ethanol policy is good policy you would not be able to find a supporter of the program,” he added.

Welch said the federal government should “stop picking winners and losers” by directing so much corn into ethanol production through its three-pronged program of mandated usage, a tax credit for blending ethanol, and a protective tariff on foreign ethanol.

“Mandating the use of ethanol, subsidizing its cost, and protecting ethanol from competition is triple overkill,” he said. “Greater energy independence is a worthy goal for the United States, but the negative and unintended consequences of moving too far too fast with corn-based ethanol have become overly clear.”

The price of corn began its relentless rise in the fall of 2006, and since then, the broiler chicken industry alone has had to spend an extra $22.5 billion in higher feed costs, Welch said, putting companies under severe financial stress, pushing some out of business, and causing most others to reduce production.

Welch said Congress should change “the rules of the game” to permit animal agriculture producers to compete more fairly for the limited supplies of corn expected over the next few years.

“Included in this effort must be a ‘safety valve’ to adjust the Renewable Fuels Standard (the ethanol mandate) when there is a shortfall in corn supplies,” Welch said. “In addition, a plan should be implemented to allow a reasonable number of good, productive cropland acres to opt out of the Conservation Reserve Program (CRP) on a penalty-free basis.”

The CRP pays farmers to take cropland out of production, which Welch said is a vestige of the traditional federal “policy of abundance” in agriculture. According to a report from the Farm Foundation, the existing policy is “designed to reduce supply, restrict land use and increase demand to help increase and stabilize farm incomes.”

“That policy was developed because the United States has generally been blessed with the ability to produce more than could be consumed at profitable prices for producers,” the Farm Foundation report said. “A shift to a ‘policy of shortage’ would emphasize programs that stimulate supply and do not subsidize demand with taxpayer funds or political mandates.”

“I ask this Committee to support this well-reasoned conclusion of the report,” Welch said.

The National Chicken Council represents integrated chicken producer-processors, the companies that produce, process and market chickens and chicken products. Member companies of NCC account for more than 95 percent of the chicken sold in the United States.

WASDE Report Marks Turning Point as Ethanol Gobbles Up Corn, NCC Says

July 13, 2011

WASHINGTON — July 13, 2011 — This week’s report on corn and other grains by the U.S. Department of Agriculture marks an important turning point in the evolution of agriculture, according to the National Chicken Council: for the first time, the government is predicting that more corn will be used in this crop year for motor fuel than used for animal feed to help produce food for people.

“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, senior vice president and chief economist for NCC. “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.”

The World Agricultural Supply and Demand Estimates (WASDE) from USDA predict that 5 billion bushels of corn will be used for feed and related purposes in the 2010/2011 crop year, which runs through September, 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. The disparity will grow next year 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 says.

“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 skyrocketing 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.

Chicken companies are under tremendous pressure from the price of corn, which is by far the largest single factor in the cost of producing a live chicken, he said. At least one chicken company 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, he said.

The National Chicken Council represents integrated chicken producer-processors, the companies that produce, process and market chickens and chicken products. Member companies of NCC account for more than 95 percent of the chicken sold in the United States.

National Chicken Council and Other Groups Oppose Boost in Ethanol Content of Gasoline

February 4, 2009

Ethanol is made from corn

Ethanol is made from corn

FOR IMMEDIATE RELEASE Wednesday, February 4, 2009

WASHINGTON – February 4, 2009 — The National Chicken Council and other food and agribusiness groups are opposing a drive by the ethanol industry to raise the percentage of ethanol that can legally be added to motor gasoline, a limit now set at 10 percent to protect engine performance and fuel mileage.

“Our organizations strongly oppose proposals to increase the level at which ethanol can be blended into motor gasoline, and we urge you to subject these proposals to the most careful analysis,” 10 associations said in a letter to Lisa Jackson, who took office recently as head of the U.S. Environmental Protection Agency (EPA).

In addition to NCC, groups signing the letter were American Bakers Association, American Beverage Association, American Frozen Food Institute, American Meat Institute, Grocery Manufacturers Association, National Turkey Federation, National Pork Producers Council, National Restaurant Association, and the Snack Food Association.

Ethanol industry leaders, facing slumping demand for their product, are pressing the federal government to raise the 10-percent limit, first established in 1982. According to The Washington Times on February 4, 2009, “On Tuesday, ethanol industry representatives told reporters and editors of The Washington Times that they plan to lobby hard to expand that amount to as much as 15 percent.”

The 10 percent limit was originally set because EPA ruled that gasoline with that much ethanol was “substantially equivalent” to pure gasoline. To go beyond 10 percent, according to EPA, ethanol backers must prove that a fuel mixture with more ethanol (a form of alcohol) and less gasoline will not harm engine performance. The owner’s manuals of many makes of automobiles specifically warn drivers against using higher blends of ethanol because moisture attracted by the alcohol can harm components in the fuel system. Toyota Motor Sales USA, Inc., announced last month a recall of more than 200,000 luxury Lexus vehicles because “some ethanol fuels with a low moisture content may corrode the internal surface of the fuel delivery pipes,” the company said.

Ethanol also delivers less vehicle mileage per gallon, which is hardly noticeable at the 10 percent level but reaches a 30-percent loss in mileage for “E-85” fuel, a blend of 85 percent ethanol and 15 percent gasoline that can be used in “flex-fuel” vehicles, according to the National Science Foundation.

In the letter to Ms. Jackson, the food and agribusiness groups said they support the development of fuels derived from “cellulosic” sources and other types of biofuels. But EPA should hold the line on ethanol added to motor fuel until the agency completes a lifecycle assessment of the impacts of biofuels on climate change, as required by the Energy Independence and Security Act of 2007, the letter said.

The federal Department of Energy (DOE) and EPA should also complete an assessment of the impacts of intermediate blends on engines and certify that there are no performance, safety, or environmental concerns with raising the 10 percent blend before authorizing such an increase, the letter said.

“As you know, a five-fold increase in the production of conventional biofuels since 2000 — in combination with other factors, such as rising energy prices, poor weather, and global demand — has contributed to volatile commodity prices and a sustained period of commodity and food inflation,” the food and agribusiness groups wrote. “Nearly one-third of the 2008 corn crop is being diverted from food and feed to fuel. Investing in cellulosic and advanced biofuels is one way the administration can help ensure that we are not pitting our energy security policies against our food and climate security policies. We urge you to oppose proposals to increase the amount of biofuel into our fuel supplies until critical studies are completed and sustainable alternatives are commercially available.”

The National Chicken Council represents integrated chicken producer-processors, the companies that produce, process, and market chickens. Member companies of NCC account for approximately 95 percent of the chicken sold in the United States.

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