Economist points to dramatic growth in ethanol industry's corn use

By CAROL RYAN DUMAS

Capital Press

Representatives from the livestock and poultry industries were united in recent congressional testimony that corn-based ethanol, among other factors, has a negative effect on feed prices and availability.

Testifying at the Sept. 14 hearing by the House Ag Subcommittee on Livestock, Dairy and Poultry, the witnesses urged lawmakers to end ethanol subsidies and tariffs and provide a mechanism for an automatic waiver of the renewable fuels standard when the stocks-to-use ratio falls to a certain level or corn prices rise to a certain level.

Corn prices are pushing $7.50 a bushel, a far cry from historic prices of $2 a bushel, they said. Nearly half of the U.S. corn crop now goes to ethanol production, leaving corn for feed and food in tight supply, and inflating feed and food prices, they said.

"While U.S. corn exports and industrial usage other than ethanol have remained relatively constant since 2000, the amount of corn for ethanol has increased eight-fold, with three-quarters of that increase occurring since 2005," said Steve Meyer, livestock economist and president of Paragon Economics, Adel, Iowa.

Meanwhile the use of corn for feed has dropped 20 percent since 2005, he said.

The witnesses said they are not against ethanol, but ethanol policy must be reformed, as the resulting feed prices are running producers out of business.

Subsidized ethanol has led to record-high corn prices, record-high cost of production and record-high meat prices and lower per-capita meat consumption, Meyer said. That, in turn, led 61,210 beef and hog operations to close between 2007 and 2010.

"If you hear from anyone that 'the government should not be deciding on winners and losers,' please realize that you have already done so," he said.

"We are in a real crisis. The U.S. livestock and poultry industries are beginning massive consolidation," said Phil Greene, vice president of Foster Farms, Fresno, Calif.

Producers are going out of business, and the U.S. is only seeing the beginning of food inflation, he said.

"Why? We fool ourselves that using corn for ethanol production doesn't drive up commodity prices," he said.

He urged USDA to reform ethanol policy and allow more conservation land into production.

Ethanol's impact on corn prices has resulted in an 11 percent decrease in turkey production since 2008, reducing production to its lowest level in 20 years, said Ted Seger, president of Farbest Foods in Huntington, Ind., and past chairman of the National Turkey Federation.

Congress needs to reform ethanol policy to create a safety net that ensures corn availability and food security, he said.

The problem for California dairymen is not feed availability, it's the price of feed, said Eric Erba, senior vice president of administrative affairs with California Dairies Inc.

Rolled corn has gone from an average of $125 per ton from 2000 to 2008 to $300 a ton today, he said.

Dairy producers are critical of the federal policy that favors fuel over food because it puts them at tremendous risk for higher production costs with no guarantee of higher prices for their product, he said.