March 9, 2007

Higher meat and poultry prices seen as ethanol hits corn supply

Meat and poultry producers worldwide are facing rapid increases in the cost of the grain needed to feed their animals, which economists predict will result in higher consumer prices, the American chicken industry told US Congress.

Soaring demand for corn, the largest component of animal feed, from ethanol producers has doubled the cost of corn in recent months and driven up by 40 percent the feed cost of the chicken industry alone, a spokesperson told the livestock, dairy and poultry subcommittee of the House Agriculture Committee here today.

Matthew Herman, manager of a Tyson Foods chicken production and processing complex in Monroe, North Carolina, cited forecasts by Dr Bruce Babcock, an economist at Iowa State University, on the impact of the corn prices on the poultry industry. The rate of growth of production has slowed, which will allow wholesale prices to rise to cover the increase in feed costs, which will eventually be reflected in higher retail costs, Babcock predicted.

The country could actually face a shortage of corn, its most abundant crop, as ethanol demand¡ªdriven by federal subsidies and mandates¡ªoutstrips supply, Herman said.

Animal agriculture has survived high feed prices in the past, but those were temporary conditions caused by bad weather or other problems, he said. The high prices facing the industry now are caused by ethanol subsidies and mandates set by law.

The livestock and poultry industries normally purchase more than half of the corn produced in the country to make feed for their animals. However, the rapidly expanding ethanol industry consumed more than two billion bushels of corn, or 18 percent of production, in 2006 and will take as much as 3.5 billion bushels in 2007, Herman said.