Rising Corn Prices Threaten Meat Profits, Seaboard Says

Meat-industry profits are threatened by rising feed expenses, according to Seaboard Foods LLC, the third-biggest U.S. hog producer, which said higher corn prices will cost the company an additional $85 million this year.

Government policies that promote corn use for ethanol are the “paramount” reason for the increased expense, Rod Brenneman, the chief executive officer of Merriam, Kansas-based Seaboard, said today at a hearing of the House Agriculture Committee panel that oversees livestock.

“These policies need to be reevaluated and, in my opinion, completely changed,” Brenneman said. “When roughly 40 percent of the corn crop is used to produce fuel instead of animal feed orfood production, it is difficult for anyone to argue that the policies have had no impact on food prices.”

Biofuel opponents in Congress are trying to end early a 45- cent-a-gallon tax credit offered to blenders of ethanol, a move supported by the meat industry. Senators Dianne Feinstein, a California Democrat, and Tom Coburn, an Oklahoma Republican, yesterday introduced a bill to repeal the subsidy, which costs taxpayers $6 billion a year. The measure is set to expire at the end of the year. The legislation would also end a 54-cent-a- gallon tariff on ethanol imports.

Ethanol Supporters

Ethanol supporters including Senators Kent Conrad, Democrat of North Dakota, and Charles Grassley, Republican of Iowa, today introduced a bill that would cut the credit to 20 cents a gallon in 2012 and 15 cents in 2013, before pegging it to the price of oil. The legislation would continue the tariff, at a lower level, and extend incentives to install gasoline pumps that can handle higher biofuel content.

Brenneman said high corn prices will discourage livestock producers from expanding herds over the next several months, while meat demand will keep them from contracting.

The price of pork may rise faster this year than the 6.5 percent to 7.5 percent forecast by the U.S. Department of Agriculture last month, he said in an interview after the hearing, which was called to review the state of the U.S. pork industry.

Higher Corn Prices

Prices for corn, the main ingredient in livestock feed, have almost doubled in the past year, and on April 11 touched $7.8875 a bushel, the highest since June 2008, as demand for ethanol surged. Hog futures traded in Chicago are up 6.2 percent in the past year, even after tumbling 3.1 percent yesterday, the most since October, on signs the higher prices are cutting into demand for U.S. pork.

The National Cattlemen’s Beef Association yesterday said it supported the legislation proposed by Feinstein and Coburn.

“All we are asking is to compete head to head for a bushel of corn,” said Bill Donald, the group’s president, said in a statement. “The federal government shouldn’t be in the business of picking winners and losers.”

Chris Thorne, a spokesman for the biofuels lobbying group Growth Energy, said in an e-mail that eliminating ethanol supports would raise gasoline prices and “effectively pull the rug out from under the ethanol industry -- at the cost of jobs, economic development and our energy security.”

(Source: http://www.bloomberg.com/news/2011-05-04/rising-corn-prices-threaten-meat-profits-seaboard-says-1-.html)