Corn is the new greenback again, which leaves meat and poultry in the red, and over the past year, it has been the hot topic on the minds of executives in the industry all year long.

Every four years or so, one hears a lot about ethanol in the run-up to the presidential election, as politicians posture about its importance in reducing America’s dependence on foreign oil — and hope to ingratiate themselves with Iowa caucus voters. However, voters rarely hear about the potential consequences to their pocketbooks from diverting corn — and soybeans when needed — to produce ethanol.

In a year of low corn and soybean crops, meat and poultry producers are now living out those consequences as higher feed costs impact their business, but so far at least haven’t threatened consumer demand.

Flammable and colorless but not odorless, ethanol’s most common usage is as a motor fuel or fuel additive. It is appealing as an oil alternative because it yields 34 percent more energy than is needed to produce it, according to the United States Department of Agriculture’s (USDA)“The Energy Balance of Corn Ethanol: An Update” report. And it’s largely derived from transformed corn or soybeans readily available on U.S. soil, as opposed to oil wells in mostly unstable countries.

However, many ecology experts are now saying there is not enough farmland to produce the amount of corn, wheat, rice and soybeans needed to power U.S. energy needs. Charles Washburn, professor emeritus at California State University in Flagstaff, Ariz., estimates that all of these materials would cover only 4 percent of Americans’ energy usage, in the Bloomburg.com editorial, “Forget the Ethanol Myth — Avoid Biofuel Bubble.”

Yet, ethanol remains heavily subsidized by the U.S. government, and it doesn’t seem that will change anytime soon. In March, the leadership of the National Cattlemen’s Beef Association, National Pork Producers Council, National Chicken Council, the American Meat Institute and National Turkey Federation brought their concerns to Capitol Hill, protesting the 51-cent-per-gallon subsidy for ethanol producers and consequently needed 54-cent-per-gallon tariff on ethanol.

They also offered new ideas to prevent additional corn price increases. For one, industry representatives suggested the USDA’s Conservation Reserve Program release non-environmentally sensitive cropland without penalty. Also, they recommended the government use bio-based materials like cellulosic material or methane for new renewable fuel standards, instead of materials that reduce the availability of animal feed.

It’s unmistakable that rising oil and feed costs are impacting meat and poultry processors — chicken production costs alone are up 40 percent this year. But remarkably, the higher prices being passed on to consumers aren’t dampening demand for now. Furthermore, the industry is working overtime to stabilize prices by cutting inefficiencies, utilizing additional components of their commodities, creating more portable, shelf-stable packaging and most importantly, developing creative concepts, flavors and products.

The work has paid off. This year, the beef, chicken, lamb and deli categories experienced growth, while pork, veal, dinner sausages and breakfast sausage and bacon posted only slight declines. The USDA predicts only minimal changes for 2008 consumption, with pork showing a slight uptick, lamb and mutton holding steady, and beef, broilers and turkey showing slight declines.

Meat and Poultry Forecasts
	2004	2005	2006	2007	2008
Production (millions lbs.)	85,441	87,097	89,483	90,048	91,514
Per capita disappearance* (retail lb.)	221.4	220.5	221.4	220.8	220.2
—Forecasts are in bold. *Per capita meat disappearance data are calculated using the Resident Population Plus Armed Forces Overseas series from the Census Bureau of the Department of Commerce. Source: World Agricultural Supply and Demand Estimates and Supporting Materials. For further information, contact: Mildred Haley, (202) 694-5176, mhaley@ers.usda.gov