Government involvement impedes recovery
Improved efficiency alone will not overcome industry hurdles
As the U.S. economy shows signs of improving, the hog, broiler and beef sectors of the intensive livestock industries are breathing more easily with prospects of increased returns. This is due to both judicious and forced cutbacks in production during the past year which have restored the balance between production and demand. Resumption of exports of broiler parts to the Russian Federation will relieve this sector of the need to retain product for domestic consumption with consequential depression of revenue. Despite these trends, all is not well with intensive livestock production. There are two government initiatives which overshadow future profitability.
Ethanol production still exceeds demands
The diversion of corn to ethanol, now responsible for one third of our annual crop, continues an inexorable climb, contributing to the high cost of feed grains. The production capacity of the existing first generation plants exceeds demand, hence the need to raise the “blend ceiling” from 10% to the 15% as requested by the Renewable Fuel Association. At the present time, ethanol is exported, which contradicts the intention of domestic energy independence. The great national ethanol energy boondoggle is supported by taxpayers directly and indirectly.
Despite the vision of Secretary Tom Vilsack, the promise of long-term fuel from biomass including wood fiber, switchgrass and now municipal waste is speculative. The reality is that the technology for fermentation of other than grains to ethanol is not currently available for large scale economical production to meet the Renewable Fuel Standard of 36 billion gallons of biofuels by 2022.
GIPSA plan casts doubts
The second challenge facing livestock production relates to the intrusion of the federal government into the relationship between integrators and contractors. Recent hearings organized by the Departments of Justice and Agriculture and the new rules promulgated in terms of GIPSA suggest a plan to restructure food production to the detriment of the large, efficient and productive suppliers of protein for our domestic and export markets.
If the U.S. food producers wish to retain world leadership in production technology and efficiency it will be necessary for the current administration to review their objectives and determine whether our nation intends to continue as a free-market economy or to have the restraints of socialism imposed on our successful agribusiness systems.