Volatility, uncertainty in corn market due to RFS equally damaging for chicken producers

“We are thankful and support theaction that the U.S. Environmental Protection Agency (EPA) has taken, andappreciate the one year volume reduction, but, quite frankly, chicken producersneed a much longer term and permanent solution," said National ChickenCouncil President Mike Brown December 5 in testimony. "Congress created this mess, andultimately, Congress must fix it."

“We are thankful and support the action that the U.S. Environmental Protection Agency (EPA) has taken, and appreciate the one year volume reduction, but, quite frankly, chicken producers need a much longer term and permanent solution,” said National Chicken Council President Mike Brown December 5 in testimony. ”Congress created this mess, and ultimately, Congress must fix it.”

Brown testified at an EPA public hearing for the 2014 standards under the Renewable Fuel Standard (RFS) program. EPA released on November 15th a proposed 2014 RFS standard that will reduce the conventional fuel mandate (corn-based ethanol) from the originally required 14.4 billion gallons to 13.0 billion gallons. Congress sets the renewable fuels volume mandates, but EPA can administratively lower the requirement in certain situations.

“EPA’s announcement was a good first and welcome step, but ultimately, Congress must act,” Brown told the agency. ”Congressional action to repeal the RFS remains the most viable pathway to allowing all users of corn to have equal standing in the marketplace.”

Brown noted that last year, more than 40 percent of the nation’s corn crop went to ethanol production – not food or feed. This rising demand for corn has artificially forced prices for the commodity up by nearly 40 percent since 2005, to the detriment of U.S. food producers and hungry families. “The volatility and uncertainty in the market has been equally damaging for poultry producers,” he continued. 

Since the RFS was aggressively escalated in 2007, average annual feed costs have skyrocketed by $8.8 billion per year for poultry producers; and last year, the average U.S. family of four faced a $2,000 increase in food costs due to higher corn prices brought on largely by the RFS. 

Brown continued, “We are experiencing a bumper corn crop this year, and corn prices have fallen for many reasons, but one year of good conditions does not a trend make. We know all too well from last year’s horrific drought that corn crop projections and inventories can be erased from Mother Nature’s wrath. The law provides for a waiver to the RFS when such action is in the national economic interest. If the waiver was not warranted in 2012, how much more economic damage has to be on the horizon for a law to work?

“The insecurity and volatility for those of us who depend on corn and Mother Nature, has caused much devastation for U.S. chicken producers,” he noted.  “Since 2007, more than a dozen poultry companies have filed for bankruptcy, been sold or simply closed their doors altogether, due in large part to high feed costs brought on by the RFS.”

Before Brown concluded, he asked the agency representatives to take special note of the extreme diversity of the panelists and industries all testifying today in opposition to the RFS – “it is striking,” he said.

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