DES MOINES, Iowa (AP) — Livestock farmers are demanding a change in the nation’s ethanol policy, claiming current rules could lead to spikes in meat prices and even shortages at supermarkets if corn growers have a bad year.

The amount of corn consumed by the ethanol industry combined with continued demand from overseas has cattle and hog farmers worried that if corn production drops due to drought or another natural disaster, the cost of feed could skyrocket, leaving them little choice but to reduce the size of their herds. A smaller supply could, in turn, mean higher meat prices and less selection at the grocery store.

The ethanol industry argues such scenarios are unlikely, but farmers have the backing of food manufacturers, who also fear that a federal mandate to increase production of ethanol will protect that industry from any kind of rationing amid a corn shortage.

The subject of debate is the Renewable Fuel Standard, a 2005 law requiring the nation to produce 7.5 billion gallons of renewable fuel by 2012. The standard was changed in 2007 to gradually increase the requirement to 36 billion gallons by 2022.

While a $5 billion-a-year federal ethanol subsidy is scheduled to expire this year, the production requirement will remain, unless it’s changed by Congress.

That has other corn consumers worried that if production falls and rationing is needed, ethanol companies will be exempt. The U.S. Department of Agriculture recently reduced its estimate of this year’s corn crop because of flooding in the Midwest and drought in the southern plains, and corn reserves are expected to fall to a 20-day supply next year. A 30-day supply is considered healthy.

At the same time, the price of corn for livestock feed has risen from an average of just over $3 a bushel in 2006-07 to an average of more than $6 this year.

“If we get a short crop, the ethanol industry does not participate in rationing and the brunt will fall on livestock and poultry,” said Steve Meyer, president of Paragon Economics, a livestock and grain marketing and economic advisory company in Adel, Iowa.

A bill introduced last month by Rep. Bob Goodlatte, R-Va., would partially waive the ethanol goals when corn inventories are low.

The Grocery Manufacturers Association, which represents more than 300 food and beverage makers, also has endorsed the bill.

“We’re behind livestock producers on this issue,” said Geoff Moody, the association’s director of energy and environmental policy. “We believe if there is a need to ration that ethanol will eat first because of the mandate.”

About 5.9 billion bushels of corn were used for animal feed last year; 2.4 billion were exported; and about 4.9 billion were used for ethanol, up from about 630 million bushels in 2000, according to the National Corn Growers Association. About 1 billion bushels were eaten by humans in products such as cereal, sweeteners, and beverages.

U.S. corn farmers have steadily increased production over the years thanks to hybrid seeds and improved techniques, but Meyer said a 20 percent decline in the harvest would be enough to force corn rationing and lead to feed shortages. That would leave livestock farmers with little choice, he said.

“We can’t shut down feeding,” Meyer said. “The only way to do that is to kill the animals.”

Even if there’s no rationing, ethanol manufacturers generally have been better able to cope with high corn prices than livestock farmers because their business has bigger profit margins, said Darrel Good, an agricultural economist at the University of Illinois.

Randy Spronk, who raises corn and hogs in Edgerton, Minn., said farmers don’t want to attack the ethanol industry but they want a plan in place if the corn supply should drop significantly.

“We really don’t want to attack ethanol but wise people make plans,” he said.

Matt Hartwig, chief of staff for the Renewable Fuels Association, called the effort to rewrite the fuel standard law “little more than a Trojan horse effort” to weaken or even eliminate it. He said the farmers’ complaints were overblown and most livestock producers and meatpacking companies were making good profits.

Also, the ethanol industry now produces about 1 billion gallons of ethanol more than is required and if corn supplies fall short, it could cut back, he said.

The Environmental Protection Agency, which administers the fuel standard, said in a statement that states can already ask for a waiver “under certain circumstances, including inadequate domestic supply or harm to the economy or environment of a state.”

Texas Gov. Rick Perry did this in 2008, claiming rising corn prices were hurting ranchers in his state. The EPA said it denied the request because the quota for renewable fuel wasn’t causing severe economic harm to the state.

Meyer said many farmers are skeptical about a process that leaves such decisions to the EPA administrator, who “many in agriculture believe won’t consider the best interest of livestock.”

Good, the University of Illinois farm economist, said meat supplies could tighten if competing demands force corn prices higher. He said it boils down to a simple choice: “We’re going to have to reduce our rate of increase in corn consumption or we’re going to have to produce more corn.”

(© Copyright 2011 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.)

Comments (8)
  1. dan says:

    When it cost $1.25 to produce $1.00 worth of ethanol it is not ready for market. It should be kept in the Lab until it is a viable product. Doesnt our government waste enough money already?

  2. Free Country says:

    We are broke. Put a hold on all government programs that require subsidies to compete. Let the free market and the invisible hand dictate where our capital is directed. The government’s way is not working. They are not smarter than everyone else and they need to stop thinking that way.

  3. GN says:

    Ethanol consumes more energy than it produces. Emits Nitrogen Oxide into the atmosphere at an alarming rate. It consumes more valuable ground water than the earth in the growing regions can replenish. Its only claim to fame is that it funnels a lot of money away from taxpayers and consumers based on the increased price of goods based on corn and standard fuels. It is the classic government concept of taking money from the many and giving it to the few. Corn based ethanol needs to go away until it can be a viable stand alone product that is a benefit to all. Scientifically it isn’t going to happen using corn.

  4. Murph says:

    Algae is a non polluting alternative to diesel fuel and will finally ease the the sore necks of consumers who have had 450 lb oil men standing on them for decades! The alternative is to eventually crawl on our bellies in order to get enough oxygen to survive.Turning us thru evolution into the very snakes that keep biting us!

    1. Algae on the brain says:

      Algae? Great plan Holms. Let’s put you in charge of energy. Just because algae can be used to make fuel doesn’t mean it’s viable. You can make lots of things with hemp too, but I doubt you and your friends would advocate wasting all that good harvest on clothing. On the other hand, the nice thing about oil is that the infrastructure for the entire industry is in place and running smoothly, and we have a few hundred years of the stuff. Plus, I don’t know what planet you live on but the air on this one has been getting cleaner and cleaner for decades. Every year of my life, life expectancies have gone up. And speaking of sore necks, after next years election Obama’s boot will be off ours and we’ll be able to build that new pipeline from Canada (you know — the one he just put off deciding on for a year) and we’ll open up the gulf again for drilling, and hopefully ANWR too. Then prices will go down even more. It’s called supply and demand. We learned in the eighth grade while you were out smoking hemp.

  5. Ordinary Guy says:

    You nailed it fella! We can solve a whole myriad of problems by rethinking energy and doing it right. Getting the cost of biofuels down to market prices without subsidies is due. But today, we have to start ratcheting down corn ethanol support and force them to modify their facilities to the new cellulose technology. That takes leadership.

  6. Jack Parker says:

    Ethanol production is just another avenue for Monsanto to make more money. I understand everyone’s concerns about using so much corn to make ethanol and you’re right to be concerned. However, on the flip side, well over 80% of all grains, especially corn, are genetically modified (GMO) and toxic to the human body. It’s not safe to eat anyway. It’s good for nothing BUT ethanol. But, Monsanto doesn’t care. They want the money and power. That’s why there’s such a HUGE fight going on with the government trying to make all organic food and supplements illegal.

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