June 12, 2007

 

US livestock farmers call for end to ethanol subsidies

 

 

Soaring corn prices have caused US livestock and poultry producers to call for an end to ethanol subsidies.

 

The US ethanol industry is growing so fast it may well pass the 7.5 billion gallon production later this year, five years ahead of the targeted time. The goal when Congress set it two years ago, was to reach it in 2012.

 

US poultry and livestock producers are aghast that prices have risen so fast in the past months and corn, previously sold at bargain prices, is now a precious commodity as ethanol plants, which use corn as an input ingredient, mushroomed across the country.

 

Poultry and livestock producers say that one way to take the steam away from the current ethanol boom is to end federal ethanol subsidies. 

 

Ethanol plants get a 51 cent credit for each gallon of ethanol it blends into gasoline.

 

In Minnesota for example, the legislature this year restored a 20 cent a gallon subsidy to about a dozen ethanol plants. The subsidy had been at 13 cents the last four years following a 2003 budget cutting package.

 

Unsurprisingly, corn farmers support the ethanol subsidies, arguing that they provide economic protection against a downturn in the industry which may happen suddenly.

 

Lobby groups in Washington representing hog, cattle and poultry producers have called for an end to federal ethanol subsidies and want the blender's credit to be allowed to expire when its current authorization ends in 2010.

 

Meanwhile, ethanol plants are enjoying record profits, with some reaching a 21 percent profit margin, which infuriates poultry farmers who are struggling to maintain narrow margins.

 

As feed becomes more expensive, more poultry farmers would leave the business, forcing meat prices to go up and hurting consumers, farmers said.

 

So, in the end the question would be: would consumers be willing to pay more for food or more for fuel?