Corn Supplies Leave Pork Producers Unsure

WASHINGTON, D.C. - The National Pork Producers Council expressed disappointment with today’s decision by the U.S. Environmental Protection Agency to reject a waiver of the federal ethanol production mandate for Texas. The waiver would have eased uncertainty over feed supplies and prices and helped bring long-term stability to U.S. pork producers and consumers, according to NPPC.
calendar icon 8 August 2008
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“We are deeply disappointed with EPA’s decision,” said NPPC President Bryan Black, a pork producer from Canal Winchester, Ohio. “Pork producers need more time to adjust to the volatility of the grain markets and to the government’s ethanol mandate, which this year is requiring the ethanol industry to use about one-third of the total U.S. corn crop. That has contributed to the uncertainty with regard to feed grain supplies and prices.”

The federal Renewable Fuels Standard mandates the production in 2008 of 9 billion gallons of corn-based ethanol. That will require more than 3 billion of an expected harvest of less than 13 billion bushels of corn this year. A waiver of the 2008 RFS would have reduced the production mandate to 4.5 billion gallons. (The RFS jumps to 11.1 billion gallons in 2009.)

Pork producers have been reeling from higher prices for feed, which accounts for 70 percent of the cost of raising a hog. Feed grain prices already were increasing starting in the summer of 2006 in part because of the rapid rise in ethanol production. Since then, increased global demand for crops, weather conditions and the ethanol mandate have fueled even higher grain prices. (A bushel of corn for September delivery now is selling above $5 – it was around $7 in mid-summer – compared with about $2.60 in July 2006.) From September 2007 to April 2008, corn prices rose 124 percent and soybean meal prices went up 94 percent. During that time, pork producers lost an average of $30 per hog marketed.

NPPC in June urged EPA to grant Texas a waiver of the RFS. Without the waiver, NPPC pointed out in comments to the agency, the Texas pork industry, which generates more than 3,100 jobs and nearly $200 million in gross state income, could be adversely affected.

“The RFS has helped create one of the most volatile economic situations ever to hit pork producers,” said Black. “We need relief, and the RFS waiver was one way the government could have provided it. Now, we expect to see increasing pressure on the domestic pork industry, with the hog herd continuing to be reduced, producers going out of business, jobs being lost and retail pork prices rising.”

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