Ethanol Production and Drought Led to Corn Shortages, Higher Pricesposted: 1/11/2013
The ship’s arrival, followed a month later by Genco Predator, underscores how last summer’s severe Midwestern drought sent prices skyrocketing and hurt industries --- North Georgia poultry, in particular --- that use corn as a raw material. Chicken growers, producers, retailers and consumers suffered the higher prices.
“Pain is the right word,” said Tom Hensley, president of Fieldale Farms in Baldwin, 75 miles north of Atlanta. Fieldale is spending an extra $50 million on chicken feed this year. “We now have more days between flocks, which means, over the course of a year, we make less money. And the price of beef and chicken is at an all-time high.”
Inventories of corn remain at historically low levels. And the push for more ethanol made from corn exacerbates supply troubles.
Farmers planted 96 million acres of corn this year, the most since 1937. In the spring, the per-bushel price of corn was about $5. Then the rain stopped, crops withered, farmers harvested only 88 million acres and the price rose to $8.50.
Agribusiness giants like Archer Daniels Midland and Bunge, which handles grain operations at the port of Brunswick, realized it was cheaper to import corn from Brazil than to pay Midwestern prices for chicken, cow and pig feed. The U.S. Department of Agriculture projected imports at a record 1.9 million metric tons, a stunning turnaround for the world’s biggest producer and exporter of corn.
The poultry industry, along with governors of nine states, beseeched the Obama administration to waive biofuel rules that produce cleaner gasoline but eat up 40 percent of the nation’s corn crop. The Environmental Protection Agency denied the waiver. Corn supplies remain tight and prices high.
A year ago, shoppers paid an average of 79 cents per pound for chicken, according to the USDA. This year, they’re paying 85.2 cents. Next year, the cost could rise to 92 cents per pound.
“If we have a great corn crop, next year prices will be just high,” said Mike Lacy, a University of Georgia professor of poultry science. “If we have a bad corn crop next year, prices will be horrendously high.”
-- Dan Chapman/The Atlanta Journal-Constitution