Posted: Thursday, September 22, 2011 1:00 PM
Others point to consumption of corn by ethanol industry
Ethanol is not a significant source of increased feed and food prices, and a congressional hearing last week on the availability of feed was only a thinly veiled attack on the ethanol industry, said Brian Jennings, vice president of the American Coalition for Ethanol.
Witnesses from the livestock and poultry industries testified before the House Ag Subcommittee on Livestock, Dairy and Poultry that ethanol is the primary reason for record-high feed prices.
"I'm not saying ethanol plays no role," Jennings said. "But let's not kid ourselves, this isn't about feed availability. There's plenty of feed. The real gripe here is that the price of corn is higher than last year."
The groups testifying think they are entitled to cheap corn forever, he said.
Weather and its impacts on the corn crop this year is the biggest factor in the corn supply, which is significantly less than first projected, he said.
Speculative trading by buyers who have no interest in taking ownership of feed is also driving up the price of corn, he said. And global demand for corn, particularly in China, remains strong.
Witnesses did recognize those factors, but said the subsidized ethanol industry, guaranteed a market by the mandated renewable fuels standard, uses almost half of the corn supply and is the primary culprit.
Dairy producers have heard ethanol proponents suggest that the impact of the ethanol industry on corn prices is minimal, but other studies suggests ethanol increases corn prices 20 to 40 percent, said Eric Erba, senior vice president of administrative affairs for California Dairies Inc.
"It is economically illogical to suggest that almost half of the supply of any commodity can be removed from the market ... without any impact on price. It just doesn't make sense," he said.
The ethanol subsidy is given to blenders in the form of a tax credit, which allows them to pay more for ethanol and allows ethanol refineries to pay more for corn, Steve Meyer, livestock economist, speaking on behalf of National Cattlemen's Beef Association, said in a follow-up interview.
Ethanol refineries can cover their cost until corn reaches $8.60 per bushel, he said. And even if the blender's credit is allowed to expire, the renewable fuels standard will continue to increase consumption of corn by the ethanol industry.
Jennings argues ethanol production returns high-quality feed to the supply through dry distillers' grains, which can be substituted for corn.
That is a hollow argument, Erba said. Distillers' grains are a lower-quality feed that lacks the starch that corn contains. And current prices are about the same as for corn, even though the grains must be supplemented by other starch and energy sources to be used effectively as a livestock feed.
And distillers' grains are not stemming the precipitous decline in feed supplies, said Ted Seger, president of Farbest Foods in Huntingburg, Ind., on behalf of National Turkey Federation.
Including distillers' grains, feedgrains available to users other than ethanol plants was a net 298 million metric tons in 2007. In 2010, that available amount was only 250 million metric tons, he said.