By MEGGIE I. FOSTER
Assistant Editor

WASHINGTON, D.C. — With two sides to every story, the American livestock industry recently stepped up to voice concerns in the food-versus-fuel debate and particularly the impact of the Renewable Fuel Standard (RFS) on U.S. food prices.

Leaders in agricultural economics, the environment and the food industry hosted a conference call last week to discuss the “urgent need for the U.S. Environmental Protection Agency to revisit food-to-fuel mandates given recent flooding in the Midwest and $8 per bushel corn,” according to the June 19 press release from the American Meat Institute.

“We just want the right to a sustainable industry, and we truly believe if we can reduce the ethanol mandate it will give our farmers a chance to survive and compete in the marketplace,” said livestock and grain farmer Paul Hill, also chairman of West Liberty Foods, an Iowa turkey farm cooperative.

“With the costs of main inputs double, feed costs are unsustainable for the meat industry, and we are now a very low margin industry,” said Rod Brenneman, president and CEO of Seaboard Foods, a Kansas pork processing company. “With this ethanol mandate, we are sending corn from the mouth to the fuel tank. I strongly encourage the EPA to revisit and reopen this debate, especially considering that one bushel of corn produces 20 pounds of pork.”
Hill and Brenneman’s comments come as the EPA considers Texas Gov. Rick Perry’s (R-Texas) ethanol mandate waiver request to suspend half of this year’s mandate in light of skyrocketing corn prices, recently topping the futures market at $7.50 and their impact on U.S. consumers and business.

The petition requests that EPA use its statutory authority to reduce the RFS mandate for 2008 by 50 percent – trimming the mandate to 4.5 billion gallons of feed grain-based ethanol, from the current 9 billion gallons. This mandate is scheduled to expand to 15 billion gallons by 2015.

A recent supporter of Perry’s Texas request, the “NCBA (National Cattlemen’s Beef Association) does not believe that issuing a partial waiver of the Renewable Fuels Standard (RFS) will immediately reverse commodity price escalation, nor do cattle producers claim that it will single-handedly address the difficult marketing environment that currently exists for our industry,” said NCBA Chief Executive Officer Terry Stokes. “But, the RFS is clearly one factor contributing to higher feed prices.”

NCBA notes that 25 percent of 2007’s record corn crop was processed to produce ethanol. That percentage will likely be much higher this year, as corn acres have been reduced and spring crop progress has been extremely slow. Grain harvest projections recently received another major setback as a result of catastrophic flooding in critical areas of the Corn Belt.

“Corn growers responded to increased demand last year by producing a record harvest. However, the cattle industry does not operate in the past,” Stokes states. “Both the marketplace and Mother Nature have created a drastically different scenario this year. Lower acreage and below trend line yields can only mean one thing: less corn.”

As one of the criteria for granting a waiver, EPA must consider the issue of economic harm caused by the RFS. In its recent submitted comments to the EPA, NCBA emphasizes that ethanol production mandates driven by the RFS are not only creating hardship for livestock producers, but for other industries and consumers as well.

Economic hardships

Thomas Elam, president of FarmEcon, LLC an independent consultng firm out of Carmel, Ind. said he has been working closely with a group of producers to study the effects of ethanol policies on the mounting food crisis.

“The ethanol mandate has done little to help much of anything,” said Elam. “In fact, the damage as a result of the mandate is going to be huge. If the mandate is not reduced, we could foresee a 7 percent increase in consumer food prices,” he indicated, as an increase to the already 5 percent rise in recent domestic food costs.
Elam notes that EPA’s ethanol mandate is a manageable tool, which can be greatly reduced to ease the strain on U.S. food prices, while weather issues such as flooding that can destroy the corn crop cannot be controlled. If the mandate is reduced from 9 billion gallons to 4.5 billion gallons or even 5 billion gallons, Elam forecasts a definite reduction in the cost of corn, however he does not foresee a reduction in food costs, but moreover a stabilization of the U.S. food supply.

“One thing the Administration can do immediately to reduce food and grain costs is they can control mandates on ethanol; and in the meantime they need to pinpoint what can actually be done to reduce our fuel needs,” said Scott Faber, of the Grocery Manufacturers Assoc. “Even if we increased to 15 billion gallons of ethanol that would still display a small fraction of our 140 billion gallon fuel needs in the U.S.”

“Yes, corn ethanol will continue to play a role in our fuel needs, but a small role,” Faber insisted. “Cellulosic ethanol poses a significantly more promising role to displace our gas needs. We’re anxious to see the second generation of alternative fuels get to commercial production.”

Effects on livestock industry

“The cost for corn went from $2.50 to $7 in 3 years, this poses a financial loss to our industry,” said James Herring, president and CEO of Friona Industries, a large-scale Texas cattle operation. “To put it simply, the cattle industry is upside down with consumers and livestock producers taking a big hit.”

“We are very conscientious of the rising cost of corn and soybeans, and we believe this is as a result of the ethanol mandate,” said Mark Hickman, president and CEO of Alabama-based Peco Foods, an integrated poultry operation. “It (ethanol mandate) has cost us $5 billion since 2006. We’re willing to compete in the marketplace, but this cost is not fair to our industry and the consumers will pay the price.”

“I see the extraordinary pain the turkey industry is experiencing, 70 percent of our cost is related to feed, and our additional cost since November is nearly $1 billion,” said Hill. “Family farmers are facing a direct threat to hang onto their farms, they are out there with no safety net, banks won’t loan them money and they’re not going to make it on their own.

I’ve personally warned our state government officials that no safety net puts our food industry in danger and now look where we are. This is scary. We need to ease back on ethanol policies,” Hill warned, clearly concerned about the survival of the U.S. turkey industry.

“I’m concerned about the environmental effects of the ethanol mandate, especially the 100 million tons of soil erosion, 300,000 tons of nitrogen running into the Mississippi River and basin,” worried Richard Wiles, executive director of Environmental Working Group. “And besides that, the ethanol mandate has done little to reduce fuel needs.”

“We could convert all of the corn from the world into ethanol and still would not have our oil covered,” added Brenneman, of America’s 140 billion gallon fuel needs per year.