Twenty-eleven has been a tough year for the chicken industry. But many analysts feel that 2012 will be better. If, that is, the federal government does not throw more obstacles in our way.
Executives and analysts speaking at the National Chicken Council Annual Conference in Washington in October were unanimous in agreeing that 2011 was a year we would rather forget. Sky-high grain prices put companies in a bad spot and drove several of them out of the business. Fortunately, most of the facilities involved were taken over by other companies and will continue to operate. But two plants in North Carolina were actually shut down, depriving about 1,000 plant workers of their jobs and 150 growers of their contracts.
The hope expressed at the annual conference was that supply and demand will be more evenly matched in the coming months. The supply of competitive protein, specifically beef, is expected to be relatively tight because of the seemingly never-ending drought in the Southwest. Chicken is poised to gain market share as a result. The fundamental fact that chicken production and processing is highly efficient won’t change, and export markets have been strong despite difficulties with Russia and China. So the industry could be positioned for growth in 2012.
Regulatory wild cards
The wild cards, unfortunately, are poor policy choices by the U.S. government. As I write this, we are awaiting publication of the final rule proposed by U.S. Department of Agriculture’s Grain Inspection, Packers & Stockyards Administration. The GIPSA rule would cost the poultry and meatpacking industries billions of dollars with no benefit to anyone but plaintiff’s lawyers. We have been hoping that cooler heads in Washington will prevail and at least remove some of the more onerous provisions of the rule. After all, it was President Obama who ordered federal agencies by Executive Order to “ensure that regulations protect our safety, health and environment while promoting economic growth,” as he, himself, put it.
I continue to implore the President to order the Secretary of Agriculture to withdraw the GIPSA proposed rule, reissue it within the confines of the provisions included in the 2008 Farm Bill, and allow a public comment period on the new proposal with an in-depth economic impact analysis.
Environmental regulation is another major question mark. The Environmental Protection Agency is pushing a comprehensive regulatory framework in the Chesapeake Bay region. Thanks to a questionable deal settling a lawsuit by environmental advocacy groups, EPA is trying to grab the power to control all types of land use in the region, taking that job away from the states. Since farming is a major activity in the Chesapeake watershed, it will bear a good deal of the burden if EPA gets away with its proposed plan.
NCC has joined in a lawsuit against EPA filed by the American Farm Bureau Federation and state farm bureaus. We are concerned about the Chesapeake Bay region specifically, but everyone knows that EPA wants to apply its program nationwide. The agency is already moving in that direction in the Gulf Coast area, which could lead to a regulatory regime for the entire Mississippi-Missouri watershed, which stretches from the Gulf of Mexico to Canada and from the Appalachian Mountains to the Rockies. There seems to be no end to EPA’s ambitions.
Government supports for corn ethanol live on
Finally, of course, there is the ongoing disaster of the ethanol program, which has been the biggest single factor in creating an artificial demand for corn and running up the cost of grain. At long last, we are seeing some glimmers of hope.
We expect that one of the pillars of support for the ethanol program, the Volumetric Ethanol Excise Tax Credit, will be allowed to expire on schedule at the end of 2011. However, ethanol groups will go down fighting on this one. Despite what they say in public, they will keep trying right down to the wire to extend the credit or get it rolled over into some type of subsidy for the infrastructure improvements that they think will allow them to get more ethanol into gasoline tanks.
Getting rid of VEETC, however, will have only a marginal impact on the ethanol industry’s voracious demand for corn. That won’t shrink until the ethanol mandate, officially known as the Renewable Fuel Standard, is reformed. We were very pleased when Congressmen Bob Goodlatte, R-Va., and Jim Costa, D-Calif., recently introduced a bill to put the brakes on the RFS. Their bill would tie the amount of ethanol required by the mandate to the amount of corn available. If it were in effect today, the mandate would be reduced by 25%.
The Goodlatte-Costa bill shows that there are still people in Congress who believe in balance and common sense. It also demonstrated the growing bipartisan opposition to an ethanol policy long on politics and short on practicality. I hope all members of the industry contact their representatives in Congress and urge them to support the RFS Flexibility Act.