Smithfield hopes for ethanol mandate; NPPC on drought

30-07-2012 | |

C. Larry Pope, CEO for Smithfield Foods, the world’s largest pig and pork producer, called for a reduction to the federal ethanol mandate in the Wall Street Journal last week.

Smithfield buys approximately 50,900 tonnes of corn (128 million bushels) per year to feed 16 million pigs on farms across 12 states. The company contracts with about 2,135 swine producers throughout the United States.

Pope’s opinion article came only one day after ethanol advocates released a Iowa University study that claims to show that cuts to the federal mandate would not lower prices for corn to the extent the livestock industry may want to see.

Devastating corn crops
Pope said that drought conditions are devastating corn crops, causing prices to hit record high levels. He added that the Renewable Fuels Standard (RFS) has worsened the problem.

“The RFS has diverted so much corn as a questionable substitute for gasoline that in the face of this drought-depleted harvest, major food-producing companies such as Smithfield are being forced to seek alternative markets for grain to meet the demands of their livestock and at more affordable prices,” Pope wrote.

“Ironically, if the ethanol mandate did not exist, even this year’s drought-depleted corn crop would have been more than enough to meet the requirements for livestock feed and food production at decent prices.”

Double whammy
The Smithfield CEO continued: “This year, the double whammy of a drought that’s ravaging crops and ethanol demand has pushed corn prices to what are now record-high levels of over $8 per bushel, a quadrupling of prices in less than a decade. This has compelled food producers like Smithfield to find ways to control skyrocketing feed costs.”

He added: “For the first time in memory, corn is cheaper when it’s delivered to the US from abroad than if it’s purchased from domestic suppliers. Smithfield was forced to take the unfortunate but absolutely necessary step of buying corn from Brazil – spending money that under normal circumstances would have gone to US farmers.”

NPPC calls for relief
The issue will also be discussed by the US National Pork Producers Council (NPPC), teaming up in a press conference today with the poultry, turkey and cattle council in order to assess the impacts of the drought.

In a press release the council writes: “As serious drought conditions continue moving across nearly two-thirds of the country, we are at a critical juncture where federal policy meets real world realities. Because of these extreme weather conditions, corn prices are spiking and some analysts are predicting that the US may experience a severe corn shortage this summer.”

“Another short corn crop would be devastating to the animal agriculture industry, food manufacturers, foodservice providers and consumers. Livestock and poultry producers on Monday will be seeking help to address a short corn supply, save thousands of jobs across many US industries and keep food affordable for American families.”
Related websites:
Wall Street Journal
Smithfield Foods
National Pork Producers Council (NPPC)

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ter Beek
Vincent ter Beek Editor of Pig Progress / Topic: Pigs around the world