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U.S. ethanol policy is continuing to drive meat and poultry prices higher, according to preliminary results of an analysis revealed this week by expert economist Tom Elam at the Annual Meat Conference in Nashville, Tenn.
"You cannot use the combined grain crops of Australia and Indonesia for U.S. fuel and not have an impact on corn, soybean and food prices," said Elam, president of Farm Econ, who expects food price inflation to rise five or six percent in 2009.
Elam said that he estimates the cumulative costs to the food industry of the renewable fuel program will be about $100 billion from 2005-2010. The program mandates minimum ethanol production and provides tax incentives for ethanol use.
As part of his analysis, Elam compared what would have happened without the federal biofuels program with what has happened. According to his findings, farm level corn prices in 2008 would have averaged about $2.77 per bushel without the program. But ethanol tax credits have added $1.33 per bushel, and may drive corn more than $5 a bushel in 2009.
Without the biofuels program, Elam estimated that 2008 ethanol production would have been 4.5 billion gallons, but the program has added at least 4.2 billion gallons. Ethanol would have been $1.69 a gallon, but increased demand for corn and higher corn prices are driving ethanol prices up and they now are 51 cents a gallon higher than that.
Approximately 76 million acres of corn would have been harvested in 2007, but the program added 10.5 million acres, said Elam. As a result of the program, this year's costs to the broiler industry are up $3.4 billion; turkey input costs are up $646 million; swine input costs are up $2.9 billion; cattle input costs are up $2.24 billion; and dairy producer input costs are up $2.7 billion, he said.
Translated into a cost per animal, Elam estimated the costs at 53 cents per chicken; $3.40 per turkey; $38 per hog and $117.50 per fed beef animal.