October 14, 2010

US meat and poultry prices to rise on ethanol decision

A US government decision to allow higher concentrations of corn-based ethanol in gasoline will raise meat and poultry prices, according to the US' largest meat processer Tyson Foods.

"While this policy improves demand for corn, it is also contributing to higher consumer prices for food, including meat and poultry," said Gary Mickelson, a spokesman for Tyson.

The US Environmental Protection Agency agreed to let refiners increase the corn-based fuel additive in gasoline to as much as 15%, up from 10%, for vehicles in model-years 2007 and later. Meat and poultry producers said greater use of corn for ethanol will boost feed costs beyond current levels.

Corn futures in Chicago today reached US$5.88 a bushel, the highest for a most-active contract since August 2008, after the USDA on had lowered its forecast for the US crop on October 8.

"We're already seeing corn prices and the cost of raising a hog heading up," said Randy Spronk, chairman of the ethanol taskforce for the National Pork Producers Council. "Any upward pressure on corn prices will have a negative effect on producers," he said.

The industry does not want a repeat of the last few years, when high feed costs pushed family farms out of business, reduced herd sizes and led to US$6 billion in losses from October 2007 through March 2010, Spronk said.

Greater use of corn by the ethanol industry will push up chicken prices, said George Watts, president of the National Chicken Council. Rising grain prices led to a 6% increase in the retail price of fresh, whole chickens from 2008 to 2010, he said.

From December 2007 to February 2010, the cattle-feeding sector of the beef industry lost a record US$7 billion in equity partly because of high feed costs and the weak economy, the National Cattlemen's Beef Association said.