The USA's energy policies are being questioned at home and abroad as prices for grains, food and energy continue to rise worldwide. Namely, the U.S. government's policy mandating the production of renewable fuels is being labeled by many as misguided, and by some even as immoral. Both of those epithets were heard at a recent gathering of 30 or so people in the worldwide poultry business. In Atlanta for the International Poultry Expo in late January, they gathered in a ballroom of one of the city's major hotels to hear two of the industry's leading economic and business consultants Dr. Paul Aho and Mr. Gordon Butland assess grain prices and their impact on poultry companies and consumers around the globe.
It's clear that U.S. legislative mandates for biofuels are driving up corn prices worldwide; and one question is how high.
Dr. Aho says U.S. poultry producers should expect to pay $6 a bushel for corn in 2008, if the harvest is good. If drought occurs, his price predictions rise as high as $8 a bushel for corn and $18 a bushel for soybeans. Of course, higher grain costs are blamed for rising consumer prices for poultry and other foods.
From industry's perspective, the U.S. renewable fuels policy adds insult to the injury of the high grain costs because its goals seem utterly unattainable. The 2007 Energy Bill mandates the production of 36 billion gallons of biofuels by 2022. Aho put the mandate in perspective by noting that it would require the entire current U.S. corn crop to produce that volume of ethanol. Of course, the government doesn't expect all the mandated volume to come from corn-based ethanol (just 15 billion gallons or 40 percent of the current crop). The rest is to come from "advanced biofuels" including things like cellulosic biofuels for which the technology doesn't exist today.
Mr. Butland stressed the human and economic costs of the high grain prices. Even where industry is able to pass the increased cost of production along to customers in higher prices, there are still negative impacts on the economy. As food prices rise, consumption declines, especially in poorer economies where people may no longer be able to afford to buy poultry and other grain-based foods. This can result in political instability, he noted, pointing to the tortilla riots that occurred last year in Mexico. Butland, who lives in Thailand and consults worldwide, said those living in the USA may underestimate the depth of resentment engendered internationally by the U.S. biofuels policy.
Naturally, the poultry industry is upset over the escalation in grain prices, but industry people are not the only ones questioning the wisdom of current renewable fuels policy. Include in that group experts in academia and at think tanks. Complaints range from purely economic misgivings to social and ecological criticisms.
The Cato Institute recently called the U.S. government's support for biofuels "misguided" and said the policy is "adding to consumers' woes." Bureau of Labor Statistics cited by the Institute's Sallie James shows poultry prices increasing 6.3 percent for the 12 months ending December 2007.
What's more, two separate studies published last month in the prestigious journal Science point out the ecological problems created by biofuels. The studies indicate that biofuels cause more greenhouse gas emissions than conventional fuels once the full toll of emissions from producing and using them is taken into account. In the wake of the studies, a group of the USA's most eminent ecologists and environmental experts sent a letter to President Bush and Congress, urging a reform of biofuels policy.
Even worse, industry critics are seizing on present circumstances to call for a reduction in meat and poultry consumption. These critics are linking the production of meat proteins with the consumption of scarce grains and energy and the depletion of natural resources. This is a potentially serious challenge for our industry over the longer term.
Unhappy with U.S. biofuels policy? With November elections approaching, now is the time to make your views known to political candidates.