U.S. ethanol policy to drive meat and poultry prices higher

by Editor fleischwirtschaft.com
Thursday, March 13, 2008

U.S. ethanol policy is continuing to drive meat and poultry prices higher, according to preliminary results of an analysis.

This analysis has been carried out by expert economist Tom Elam, Ph.D., president of Farm Econ. He said he expects food price inflation to rise five or six percent in 2009.

Elam estimates the cumulative costs to the food industry of the renewable fuel program will be about $100 billion from 2005 to 2010. The program mandates minimum ethanol production and provides tax incentives for ethanol use.

As part of his analysis, Elam compared what would have happened without the federal biofuels program with what has happened. According to his findings, farm level corn prices in 2008 would have averaged about $2.77 per bushel without the program. Ethanol tax credits have added $1.33 per bushel, and may drive corn more than $5 a bushel in 2009.

Approximately 76 million acres of corn would have been harvested in 2007, but the program added 10.5 million acres.

Elam noted that as a result of the program this year’s costs to the broiler industry are up $3.4 billion; input costs for turkey are up $646 million; fore swine up $2.9 billion; for cattle up $2.24 billion; and dairy producer input costs are up $2.7 billion. Translated into a cost per animal, Elam estimated the costs at 53 cents per chicken; $3.40 per turkey; $38 per hog and $117.50 per fed beef animal.

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