April 11, 2007

 

USDA: Ethanol to stir challenges for meat and dairy
 

 

The pork, chicken and dairy sectors will have to brace for the next two years as corn used in animal feed will be increasingly diverted to ethanol, US agriculture secretary Mike Johanns said Monday (April 9).

 

According to major trade players, the ethanol boom will have consumers pay more for their meat and dairy products though plans to increase corn acres could ease some of that pain.

 

The planned expanded acreage was reported by the USDA's National Agricultural Statistics Service, projecting farmers will devote 15 percent more acres for corn in 2007, the largest since 1944.

 

However, Bill Roegnik, senior vice president and chief economist of the National Chicken Council, said the planting report will not pull down prices as corn will remain at "historically high price levels" as rapid increase in corn production costs have already shown up in poultry.

 

The price of corn has driven the cost of feeding chickens up 40 percent as the increase will be passed on to consumers sooner or later, he said.

 

Chicken is the most popular meat with consumers.

 

Dairy producers also worry as the National Milk Federation spokesman Chris Galen admits the ethanol boom will create problems for the industry.

 

The pressure to produce corn has encouraged some farmers to consider planting corn on land enrolled in a government program that pays them to set their land aside for conservation. After the planting report was released, showing a big corn increase, Johanns decided not to ease penalties for farmers who decide to pull acres out of the Conservation Reserve Program (CRP) early.

 

Still, the department has decided not to add any more land to the program for 2007 in favour of boosting corn production. President George Bush's budget planned for a two-year suspension of new CRP enrolments, but Johanns said March 30 that he is "open to the possibility" of new enrolments for 2008.

 

Johanns said the gush in corn-based ethanol is expected to surge but only temporarily as the government is also actively promoting cellulosic ethanol or biofuel made from wood chips, switchgrass and corn-plant parts. However, the process is still at its infancy stage.

 

The rage to plant more corn has the USDA estimated a production of 15 billion gallons of ethanol a year. The Renewable Fuels Association said there are currently 114 biorefineries nationwide that have a capacity to produce more than 5.6 billion gallons yearly.