NCC responds to WASDE report on corn usage

The recent report on corn and other grains by the US Department of Agriculture marks an important turning point in the evolution of agriculture, according to the National Chicken Council: for the first time, the government is predicting that more corn will be used in this crop year for motor fuel than used for animal feed to help produce food for people.

“Raising poultry and livestock as food for people is taking second place to putting ethanol derived from corn into America’s gasoline tanks,” said Bill Roenigk, senior vice president and chief economist for NCC. “Because of an arbitrary federal mandate, larger and larger amounts of ethanol will be produced from the corn crop, and less will be used to feed the animals needed for America’s dinner plates.”

The World Agricultural Supply and Demand Estimates (WASDE) from USDA predict that 5 billion bushels of corn will be used for feed and related purposes in the 2010/2011 crop year, which runs through September, while 5.05 billion bushels will be used for ethanol and byproducts. The report marks the first time that ethanol usage will exceed feed usage, Roenigk said. The disparity will grow next year as 5.05 billion bushels are used for feed and 5.15 billion bushels go into the ethanol category, USDA predicts. Ethanol will claim 37% of corn usage next year, USDA says.

“USDA’s overall estimates of corn production are thought by many analysts to be somewhat optimistic,” Roenigk noted. “They expect that less corn overall will be produced. If that is correct, than even less corn will be available for poultry and livestock feed because the ethanol sector will always get enough to fulfill the mandate. Ethanol producers will always be able to outbid livestock and poultry producers because the fuel industry is required by law to buy ethanol.”

The mandated demand for ethanol has contributed to the skyrocketing cost of corn, which now carries a price tag nearly three times as much as the cost five years ago, when the ethanol demand began to move the market, Roenigk noted. Chicken companies have spent more than $20 billion in added feed costs since then, he said.

WASDE accounts for the fact that the ethanol industry throws off a certain amount of byproducts, such as dried distillers’ grain with solubles (DDGS), which can be used as a feed supplement for livestock and poultry. However, it lacks the nutritional and energy values of corn.

“Producers would rather have corn, but since sufficient quantities are not available at reasonable prices, they will use some DDGS to try to stay in business,” Roenigk said.

Chicken companies are under tremendous pressure from the price of corn, which is by far the largest single factor in the cost of producing a live chicken, he said. At least one chicken company went bankrupt and sold its assets recently, contributing to consolidation within the industry, while others have announced production cutbacks and laid off workers, all because of the rising cost of production driven by the high cost of corn, he said.

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