April 16, 2008

US livestock farmers urge Congress to ease renewable fuels rule

The US meat and poultry industries are calling for Congress to ease or remove the energy law that allows the production of feed grain-based renewable fuels.

The calling may be effective as the Congress has admitted that the energy law may require adjustments due to overly ambitious biofuel mandates, which in turn has led to the continuous price hikes of feed grains.

The meat and poultry industries are pushing hard for changes due to the sky-high prices of feed grain such as corn and soy, which has made their business environment very harsh. Large companies are not spared either, as leading US chicken producer Pilgrim's Pride paid a stunning US$1.3 billion extra in feed costs compared to 2006, which no doubt is decisive factor in Pilgrim's Pride decision to reduce chicken production by 5 percent.

Therefore, the industries want the renewable fuel mandate to be reduced or removed, especially for the next two years, so that feed grain prices would be restrained.

Thomas Elam, author of a recent biofuel report which is funded by the meat and poultry industry, forecasts that corn prices will rise even further due to a growing ethanol demand but an expected decrease in corn production.

Corn production will decrease despite its current high value as farmers are attracted by the even higher soy prices, said Elam. Ironically, the high soy prices are mainly caused by reduced soy planting in the past few years when farmers chose to plant the then higher-valued corn.

High prices are also caused by factors such as poor weather conditions and rising global demand, as noted by the Renewable Fuels Association. The Grocery Manufacturers Association do not disagree, but highlights that increased biofuel use is the main culprit and is the only factor that the US government can influence.

However, Elam said the greatest irony lays in the federal biofuel support policies, which have driven up demand and prices for corn, making corn ethanol production far less lucrative than expected.