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US ethanol mandate, feed costs constant challenge to poultry industry

Written October 16, 2012

National Chicken Council panelists discuss ongoing repercussions for chicken producers

The U.S. ethanol mandate and current feed costs were hot topics at the National Chicken Council's 58th Annual Conference industry outlook panel, with panelists focusing on the ongoing debate over the renewable fuel standard and "food versus fuel."

See the video from the panel here. 

“In 2006, the ethanol mandate began to really take a bite against the protein complex, and since that time on a cumulative basis, we’ve seen about $31 billion in new costs that have come in to the chicken business," said panelist Paul Fox, CEO of O.K. Foods. "And I don’t know if it’s going to get better, honestly, because I think we’re at a point where we’re almost using 42 percent of our nation’s corn product and it sounds like that’s going to continue to grow and that’s a new source of demand.” According to Fox, the market balances supply and demand in theory, but now there are elements of volatility being dealt with causing the market to work independently of that theory.

“There are a lot of industries that have gone through downturns," said Fox. "But something that’s unique to the chicken industry at this particular juncture … we haven’t seen an actual consolidator of any significant size, at least domestically, step up and start to take advantage of the fact that there are cheap chicken companies that have been offered for sale. Consequently, today in North America two of the three largest chicken companies are under control by foreign capital. I think that that’s probably a consequence that wouldn’t have been intended by our national policy in the outset.”

According to the U.S. Department of Agriculture's latest report, the corn harvest is at 10.7 billion bushels, down 21 million from the September estimate and 13.4 percent less than in 2011. This number has made the renewable fuel standard a hot-button issue for the agriculture industry and the U.S. government at large, but Dr. Clayton Yeutter, senior advisor for Hogan Lovells and panel moderator, said he thinks a decision on whether to renew the standard won't be made until after the November elections. After the elections, what happens will depend largely on how much pressure is applied to the Environmental Protection Agency, and from which parts of the government that pressure is applied, said Yeutter.

Overall, though, Yeutter said that while the agriculture industry may battle in the short term, the long term path is clear. “In the long pull, if and when this comes out to be a true food versus fuel decision, with global consequences of great significance, food is going to win over fuel,” he said. “We’re going to need as much food produced between now and the year 2050 as has been produced in the entire world during its history until now.”

See videos of the entire panel here. 

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