Dry summer hurts corn production across nation
By TIM HEARDEN
The high price and low availability of corn threatens the viability of the broiler chicken industry, insiders complain.
Since the price of corn began its ascent in the fall of 2006, the broiler chicken industry alone has spent an additional $22.5 billion in higher feed costs, said Michael Welch, a long-time industry executive and former National Chicken Council chairman.
The increasing costs have put companies under severe stress, putting some out of business and causing most others to reduce production, Welch told a House of Representatives subcommittee last week.
The U.S. Department of Agriculture predicted Sept. 12 that next summer's corn surplus will be well below levels that are considered healthy, as an unseasonably hot summer likely damaged much of this year's crop.
"It is a huge problem," said Richard Lobb, a spokesman for the National Chicken Council. "We have companies that are under severe stress that are losing money. We have two chicken-processing plants in North Carolina that are actually being closed down. The company is actually going out of business, and the biggest reason for it is the rampaging cost of corn."
Feed accounts for more than 60 percent of the cost of producing a chicken, and about 65 percent of the feed consists of corn, Lobb has said. Corn for December delivery was $6.8150 a bushel Sept. 19 on the Chicago Board of Trade.
Industry officials join many in the beef, dairy and pork industries who blame the cost increase on an ethanol subsidy and tax credit they say will cause about 40 percent of this year's corn harvest to be converted to motor fuel.
Their complaints come as legislation by Reps. Wally Herger, R-Calif., and Joseph Crowley, D-N.Y., would do away with a $5 billion annual subsidy that provides 45 cents a gallon to oil refiners who mix gasoline with ethanol. The bill would also end a 54-cent-a-gallon tariff on imported ethanol.
In addition, broiler industry representatives target the federal Conservation Reserve Program, which pays farmers to take cropland out of production.
In a hearing Sept. 14 before the House Livestock, Dairy and Poultry Subcommittee, industry leaders called on Congress to pass an opt-out provision in the CRP and adjust the Renewable Fuels Standard when corn supplies are short.
"Anything affecting the cost of producing feed for livestock and poultry directly impacts the cost of animals to the processor, the cost of meat, milk and eggs to the retailer, and ultimately the cost of food to the consumer," Philip Greene, vice president of California-based Foster Farms Commodities, told the subcommittee.
National Chicken Council: www.nationalchickencouncil.com