The nation’s largest livestock and poultry trade associations want legislators to allow the 30-year-old tax credit and a protective tariff for ethanol to expire as scheduled at the end of the year. The request was made in a letter signed by the American Meat Institute, the National Turkey Federation, the National Chicken Council, the National Cattlemen’s Beef Association, the National Pork Producers Council and the National Meat Association.

“…we strongly believe it’s time the mature corn-based ethanol industry operate on a level playing field with other commodities that rely on corn as their major input. Favoring one segment of agriculture at the expense of another does not benefit agriculture as a whole or the consumers that ultimately purchase our products,” the groups said in a letter.

The Senate Finance Committee is currently considering whether to extend the ethanol blender’s credit and the tariff on imported ethanol, both of which expire on Jan. 1, 2011.

The groups contend that “the blender’s tax credit, coupled with the import tariff on foreign ethanol, has distorted the corn market, increased the cost of feeding animals, and squeezed production margins, resulting in job losses and bankruptcies in rural communities across America.”

The groups say a September 2008 report by the Congressional Research Service (CRS) stated that the dramatic increase in livestock production costs were attributed to higher costs for feed. Between 2005 and 2008, corn prices quadrupled, reaching a record high of more than $8/bu., a pattern that is unsustainable for our industries, the groups said.

“There is no safety net to protect against the volatility in the commodity markets, forcing all industries to pay higher prices for input costs due to the fluctuations in the corn market,” the groups wrote.

The groups said animal ag has suffered serious economic hardship, including:

  • The turkey industry has seen a decrease in turkeys raised of more than 6% since 2007 levels and almost 9% reduction from 2008 levels – to adjust to these increased input costs. Nearly 3,000 jobs were lost in 2008 and 2009.

  • The U.S. pork industry endured its two most challenging years in the industry’s history in 2008 and 2009, with total losses for the industry amounting to nearly $6 billion. This financial disaster occurred despite near-record hog prices in 2008. The cause of the losses was higher production costs driven primarily by higher corn and soybean prices.

  • The cattle-feeding sector lost a record $7 billion in equity from December 2007 to February 2010 due to high feed costs and economic factors that have negatively affected beef demand.

  • The broiler industry has experienced a cumulative additional cost of nearly $15 billion, as of April 2010, since corn prices began their rise in the fall of 2006. The additional cost doesn’t include the higher cost of other feed ingredients, such as soybean meal, whose prices tend to move in tandem with corn.

The letter notes that the recent Congressional Budget Office (CBO) report entitled “Using Biofuel Tax Credits to Achieve Energy and Environmental Policy Goals,” found producers of ethanol made from corn or similar feedstocks receive 73¢ to provide an amount of biofuel with the energy equivalent to that in 1 gal. of gasoline. The report also said the cost to taxpayers of using ethanol to reduce gasoline consumption by one gallon was $1.78.

The groups reminded the committee that animal agriculture is united in its support for energy independence and the development of the renewable fuels industry. “However, 30 years of support has created a mature corn ethanol industry that now needs to compete fairly in the marketplace and allow for the next generation of renewable fuels to grow,” they said.

For a copy of the letter, click here:
-- American Meat Institute release