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Ethanol Driving Up Meat Prices, Congress Told

No Such Thing as a Cheap Lunch?

March 8, 2007

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It ain't chicken feed anymore. The nation's corn supply is being snatched from the beaks of hungry fowl and pumped into your gas tank instead.

The federal government is pumping money into the ethanol industry to provide consumers with ample fuel for their cards, but that policy may be driving up the cost of putting food -- specifically chicken and beef -- on the table.

Testifying before a House Agriculture Subcommittee, Matthew Herman, manager of a Tyson Foods chicken production and processing complex in Monroe, North Carolina, said producers are facing rapid increases in the cost of the grain needed to feed their animals, because so much corn is being purchased for the ethanol industry.

Herman cited forecasts by Dr. Bruce Babcock, an economist at Iowa State University, on the impact of the corn prices on the poultry industry. The rate of growth of production has slowed, which will allow wholesale prices to rise to cover the increase in feed costs, which will eventually be reflected in higher retail costs, Babcock predicted.

Soaring demand for corn, the largest component of animal feed, from ethanol producers has doubled the cost of corn in recent months and driven up by 40 percent the feed cost of the chicken industry alone, Herman testified.

He said the country could actually face a shortage of corn, its most abundant crop, as ethanol demand -- driven by federal subsidies and mandates -- outstrips supply.

Animal agriculture has survived high feed prices in the past, but Herman said those were temporary conditions caused by bad weather or other problems. The high prices facing the industry now are caused by ethanol subsidies and mandates set by law.

The livestock and poultry industries normally purchase more than half of the corn produced in the country to make feed for their animals. However, the rapidly expanding ethanol industry consumed more than two billion bushels of corn, or 18 percent of production, in 2006 and will take as much as 3.5 billion bushels in 2007, Herman said.

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