News and analysis on the global poultry
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on August 5, 2010

US livestock, poultry organizations oppose ethanol subsidies and protective tariffs

Government perks cause increase in feed prices

A consortium comprising the American Meat Institute, National Cattleman’s Beef Association, National Chicken Council, National Pork Producer’s Council and the National Turkey Federation addressed a letter to the Senate majority and minority leaders in mid-July opposing continuation of the tax credits and protective tariffs relating to ethanol production, which are due to expire at the end of 2010.

The letter specified that ethanol production will absorb 4.5 billion bushels of corn from the 2009-2010 harvest. Diversion of corn has resulted in escalation in feed costs, which has severely impacted the volume and profitability of intensive animal production.

Although the unprecedented corn price of almost $8 per bushel has declined, it is estimated that feed costs for 2010 will be 25% higher than the costs prevailing during the first six years following 2000. Economists affiliated with the animal production groups estimated that the pork industry was subjected to more than $6.2 billion in losses from October 2007 through January 2010 and the beef industry lost $7 billion over the same period.

The cumulative additional cost to broiler production has amounted to $15 billion from the fall of 2006 to the spring of 2010. The August 2009 U.S. Accountability Office Report “Bio-fuels-Potential Effects and Challenges have Required Increases in Production and Use” projected the annual cost to the Treasury for the Volumetric Ethanol Excise Tax Credit (VEETC) of $4 billion in 2008 and $6.8 billion in 2015. It is further estimated that the cost to taxpayers of using ethanol to reduce gasoline consumption was $1.78 per gallon.

To place biofuels production in perspective, the July 28 Weekly Ethanol Report from the Renewable Fuels Association (RFA) documented an average daily production of 34.2 million gallons for the week ending July 23, 2010. Based on gasoline production of 404.5 million gallons, ethanol inclusion represented 8.5%.

The ethanol industry, according to experts, would benefit if the so-called “blend ceiling” as mandated by the federal government were to be increased from 10% (which it has not currently achieved) to a value of 15% as requested. The RFA has joined with the National Corn Growers’ Association and the American Coalition for Ethanol to urge the Environmental Protection Agency to approve the immediate use of E12 and a full waiver for the use of E15 in all vehicles.

The debate continues and the decision of Congress may be influenced by the weight of lobbying and the concerns of vested interests on both sides of the issue.

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