Livestock and poultry producers seek ethanol policy changes to ease feed costs

By Sarah Gonzalez

© Copyright Agri-Pulse Communications, Inc.

WASHINGTON, Sept. 14--Livestock and poultry producers gathered in front of the House Agricultural Subcommittee on Livestock, Dairy, and Poultry today to contest policies they say are driving feed costs to record highs. 


The Subcommittee hearing, “Examination of the issue of feed availability and its effect on the livestock and poultry industries,” included testimony regarding the high cost of corn. Most poultry and livestock producers believe their high feed costs are disproportionally caused by subsidized ethanol production.  


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“U.S. livestock, dairy and poultry industries are confronting incredibly high feed supply prospects,” said Chairman Thomas Rooney (R-Fla.). “Earlier this week, USDA lowered its corn production estimates for the year even further, putting increased pressure on the growing demand for grain.”


According to an August Congressional Research Service report, feed costs account for 50 to 80 percent of cash operating expenses in the U.S. livestock sector and U.S. feed grain demand has exceeded production in all but one year since 2004. However, the precise reasons for the rise in feed costs are debated. 


“Subsidized ethanol has meant record-high corn prices, record-high costs of production for meat and poultry, resulting in lower per capita meat and poultry output, and finally, record-high meat prices,” said Roger Meyer, president of Paragon Economics Inc. and representative of the National Cattlemen's Beef Association at today's hearing.


The livestock and poultry producers represented at today's hearing testified that the Renewable Fuels Standard (RFS) gives an unfair advantage to the ethanol industry. 


“In light of the realities of grain supply and demand, Congress should reevaluate the corn-based RFS schedule for 2012 through 2015,” said Ted Seger, president of Farbest Foods and representative of the National Turkey Federation at today's hearing. “The Volumetric Ethanol Excise Tax Credit (VEETC), or blender's credit, is not required to support ethanol production and it should simply go away at the end of the year.”


Congress members do not seem likely to repeal or waiver parts of the RFS, and some, including Rep. Leonard Boswell (D-Iowa) said that market speculation is most likely to blame for the rise in livestock and poultry feed costs. Rep. Steve King (R-Iowa) brought to light other market factors affecting grain costs and increasing exports. 


“The real question is not specifically how ethanol affects feed prices for poultry, hogs and cattle, but what we're really dealing with is the global equation of energy and food,” King said.


According to the CRS report, reasons for record-high prices in feed include “the rapid growth of U.S. corn-based ethanol production, limited supply of available U.S. cropland to expand production, the weakness of the U.S. dollar that made U.S. agricultural exports competitive in foreign markets despite high prices, strong income growth in China and a decline in the price responsiveness of supply and demand in agricultural commodity markets.”


According to Philip Greene, representative of the American Feed Industry Association at today's hearing, three factors affecting feed costs are within governmental policy's control. These reasons include the federally subsidized bioenergy policy “that continues to mandate that food crops be used as feedstocks for biofuels at annually increasing levels,” as well as acreage reduction and market speculation regulation. 

DDGS Debate

The benefits of distilled dried grains from solubles (DDGS) were also debated during today's hearing. The nutrient and price value of DDGS, the animal feed co-product resulting from ethanol production, varies according to animal species.

According to a letter from the president of Growth Energy, a representative for American ethanol supporters, more than one-third of all grain used in the production of ethanol is returned as a nutritious distillers' grain, which is 25 percent cheaper than corn and can displace a greater amount of corn in feed rations, ultimately saving livestock producers' input costs.”

While Meyer of the National Cattlemen's Beef Association recognized that DDGS is better for beef cattle than any other species, he said the product's current transportation costs are an issue in many regions. Other sector representatives, particularly Seger of the National Turkey Federation, dismissed DDGS as an inferior product to corn that does not contain the desired nutrients. Seger said that turkey producers can use DDGS for five percent of their feed supply at the most, while corn still accounts for 50 percent. 


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