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US chicken processors seek relief over high input costs

12-Aug-2008
Last updated the 13-Aug-2008 at 16:38 GMT

The US chicken industry has expressed disappointed that the Enviromental Protection Agency (EPA) rejected a waiver on ethanol production and are urging legislators to take action over rising input costs, as a processor freezes operations.

Food processors worldwide face rising prices for their supplies, as more food and feed crops, such as corn, are diverted for biofuel production. US policies have actively encouraged this switch to biofuels.

Last week the EPA rejected a request submitted in April by the Governor of Texas, Rick Perry, for a 50 per cent waiver of the the Renewable Fuel Standard (RFS) programme to relieve the pressure on Texan meat and poultry processors in terms of feed costs.

The RFS mandates by law that fuel sold in the US contains a minimum volume of renewable fuel, such as ethanol and biodiesel. The programme aims to increase the volume of renewable fuel required to be blended into gasoline from nine billion gallons in 2008 to thirty-six billion gallons by 2022.

The EPA is responsible for revising and implementing the RFS and can grant a waiver of the ethanol mandate on economical or environmental grounds. However, the EPA said that it found ‘no compelling evidence’ that the RFS mandate is causing severe economic harm in the state of Texas.

Relief sought

Richard Lobb, spokesperson for the chicken processing trade association, the National Chicken Council (NCC), told FoodProductionDaily.com that its members can no longer afford to take the hit and were extremely disappointed by the EPA’s decision.

“The RFS has distorted the market, caused corn prices to spiral out of control and inflicted extreme economic damage on the industry,” said Lobb.

Member companies of NCC account for approximately 95 per cent of the chicken sold in the US.

Lobb said that the NCC is calling on Congress to grant the industry some relief by allowing the tariffs that limit the amount of ethanol that can be imported into the US to expire and by removing the federal subsidies allocated to producers for diversion of corn from the food supply into the fuel supply.

NCC estimates that higher feed grain prices, due largely to the ethanol programme, have cost companies in the broiler chicken industry more than $6bn since October 2006.

Plants on hold

Meanwhile, Texas based chicken processing company, Pilgrim’s Pride, yesterday announced it was freezing operations at two processing plants until the industry returns to profitability and inventory and feed prices stabilize.

It said the decision by the EPA to reject the partial waiver request from Texas assures that high grain prices would remain for the ‘foreseeable future’.

"Not only are the 2008 mandates destructive, but the scheduled mandate next year will again increase another 16.7 per cent from corn, consuming an additional 4.5 per cent or more of the 2009-2010 corn crop than the anticipated 34 per cent of the crop being consumed this year for ethanol production.

“While we had sincerely hoped to avoid further facility closures or consolidations, we recognize that we must do everything in our control to pass along higher input costs,” said the company.