What is in this article?:
• While the ethanol industry says that corn and feed prices are minimally impacted by the RFS, cattlemen and poultry producers continue to claim just the opposite — a claim they have made for years.
Almost impossible situation
“The reality is that with these (corn) prices, which have been distorted by the RFS mandate, even the most prudent and cautious producer can be put out of business. Things are now worse than in 2008 when high corn prices — and the refusal by EPA to see the economic harm coming — put turkey companies out of business.”
Chicken producers are also on an economic knife-edge said Michael Welch, President and CEO of Harrison Poultry in Bethlehem, Georgia. “One of the detrimental effects of the serious drought conditions across nearly two-thirds of the country is the fact that some analysts are predicting the U.S. (corn yield) this fall will be at least one-third smaller than the USDA’s first forecast. (This has) caused a 60 percent spike in corn prices since June. This means literally tens of billions of dollars in increased costs for livestock and poultry producers and food manufacturers.
“Chicken companies in particular are being severely impacted by the growing diversion of corn into government-mandated ethanol programs. … (As a result) six federally-inspected chicken companies in 2011 went out of business, filed for bankruptcy or were forced to be acquired by other companies, some foreign-owned. Thousands of jobs were lost, hundreds of farmers weren’t able to continue to grow chickens. A repeat scenario could be experienced in 2013.
“When Congress enacted the expanded RFS in 2007, certain safety valves for the RFS were put in place. One provision allows the administrator of the EPA to reduce the required volume of renewable fuel in any year based on severe harm to the economy or the environment of a state, a region or the United States. The worst drought since the Eisenhower administration calls for exactly the kind of flexibility Congress envisioned.”
The situation has led producers to unprecedented actions. For the first time, Alexander — a third generation cattleman in the livestock business for over 40 years — is “actually having to cut silage because the corn isn’t making an ear and not getting kernels. So, we’re doing something I’ve not done in my lifetime: taking the crop at an early stage into roughage. We’re also having trouble buying corn to feed our livestock. The prices are at record highs that I’ve never had to pay before.”
Several weeks ago before Congress, administrator Jackson downplayed the chance of issuing an RFS waiver citing increased corn planting in 2012. Along with that reluctance – which is not surprising considering the Obama administration’s fondness for the ethanol industry — ethanol plants are beginning to shut down operation because of high corn prices.
Given those circumstances, can the EPA be convinced to grant the waiver?
“We believe the EPA should relax the RFS for the remainder of (2012) and into 2013 to guard against the possibility that this crop could be so short that it could cause even more devastating loss than what we envision today,” said Thomas Elam, president of FarmEcon.
“That waiver should be granted immediately to forestall further economic harm to livestock and poultry industries of this country and the rest of the world.”
As for ethanol plants shutting down, Burkel said “remember that in 2008 (when a previous waiver request) wasn’t granted, we saw major cutbacks in production. As prices of meat have escalated in the last five years, we’re also seeing a down-shift in the consumption of meat. So, our infrastructure is at risk.
“Realizing that the ethanol industry wants to protect their infrastructure – and I don’t blame them for that – I don’t have a mandate that says ‘when you leave the grocery store, you throw a whole bird in your cart, period.’ I have to compete for corn on a whole different level than they do. … The mandate allows the ethanol industry a different position than the livestock industry.”
Burkel said turkey will be available this Thanksgiving. However, he warned of major changes coming to consumers “as we move forward, especially into (2013), given the production cuts that would have to happen to allow us to pay $8 or $9 for corn. Over time, you’ll see that shift and eventually a drop in production across all the meats. Prices will put the consumer in a position where they can’t afford to buy meat anymore, or very little of it.”
This process has been ongoing for the last five years, said Burkel. “And you can practically trace it back on a chart to the RFS (enactment) in 2007.”
Backing Burkel’s point, Elam said the wholesale price of turkey since 2007 is up over 50 percent.