October 6, 2006

 

Ethanol seen eating into corn supply for US chicken
 

 

The highly subsidised and fast-expanding ethanol industry would be forcing chicken producers to pay more and compete harder for the corn feed they need, US chicken industry leaders agreed Thursday (Oct 5).

 

John Bekkers, president and chief executive of Gold Kist Inc. (GKIS), stressed to attendees at the National Chicken Council's annual conference that "at some point in time there's going to be a bidding war between us and the ethanol plants, and we better get used to that idea."

 

There are 101 ethanol plants in the US and 39 more are under construction, according to US Department of Agriculture data.

 

The US is producing about 11 billion bushels of corn a year, Bekkers said, and by 2008 he expects 25 percent of US corn production would go toward producing ethanol.

 

USDA Chief Economist Keith Collins said recently that about 14 percent of the US corn crop went into ethanol production last year, and that would rise to about 20 percent this year. Collins said he expects the US to produce about 5 billion gallons of ethanol this year.

 

To make sure there is enough corn to meet the growing ethanol demand, to continue to fulfill export requirements and to produce enough for feed and food, the US needs to take 35 million acres of land out of a USDA programme that pays farmers not to plant, Bekkers said.

 

Assuring there is more land for corn production is especially important in case a future drought diminishes supply while demand is expected to increase sharply over the next couple of years.

 

The expected spike in demand, though, would only be short-lived because of new and more efficient forms of biofuels being developed that would likely replace corn-based ethanol, Bekkers and others said Thursday.

 

O.B. Goolsby, president and CEO of Pilgrim's Pride (PPC), said he doesn't expect any major spike in corn prices from ethanol demand until 2008, when the plants now in development come online. Pilgrim's Pride is the second-largest US chicken producer.

 

But, Goolsby added, corn-based ethanol would soon be competing with other forms of renewable fuel such as cellulose-based fuel.

 

"Short term (ethanol) is going to have an impact as we compete for that corn," Goolsby said, but over the long term "there will be other alternative fuel sources that would come into play."