US chicken company renews attack on fuel ethanol

14 April 2008 18:10  [Source: ICIS news]

HOUSTON (ICIS news)--US poultry giant Pilgrim’s Pride on Monday launched a new attack against the US ethanol industry, saying it has hurt the chicken industry by making corn feed unaffordable.

"Soaring feed ingredient costs fuelled by the federal government's misguided ethanol policy has created a crisis in our industry,” said CEO Clint Rivers.

The company said it plans to reduce weekly chicken production by 5% in the second half of 2008, compared with a year earlier, as part of an effort to balance supply and demand.

Pilgrim’s announced plans in March to close one of its 37 processing plants and 13 distribution centres in a bid to curtail losses. The company blamed the shutdowns on soaring feed prices caused by booming corn-based ethanol production.

"These unprecedented increases for corn and soybean meal are expected to add billions of dollars of cost to our industry this year,” Rivers said.

Pilgrim's net sales in 2007 totalled $7.6bn (€4.9bn). The company has capacity to process about 45m chickens/week.

The US ethanol industry has dismissed charges that large-scale ethanol production is single-handedly driving up food prices.

US ethanol lobby group Renewable Fuels Association (RFA) said soaring crude oil prices and record global demand for commodities, due to poor weather, are the main culprits behind the food crisis.

The RFA deemed attacks on ethanol from the food industry to be invalid, saying they were “Chicken Little rhetoric meant to distort the truth”.

Pilgrim’s Pride acknowledged rising energy prices were a factor, but a company official said the impact from crude “was not even close” to upward pressure caused by ethanol.

“Pilgrim’s buys 324m bushels/year of corn, and for each penny corn goes up the company spends an extra $3.2m pre-tax a year,” said corporate communications director Ray Atkinson.

Atkinson said rising feed prices cost Pilgrim’s an extra $600m in 2007. “We expect to spend another $700m in 2008,” he said.

US ethanol legislation has an unreasonable mandate on corn and the government does not have a fallback plan, Atkinson said.

The US could improve its biofuels programme by eliminating federal subsidies and the tariff levied on imported ethanol, he added.

Atkinson said US food prices would continue to climb due to the impact from ethanol on corn and other crops.

“Consumers are not seeing that impact yet,” Atkinson said, adding that the increase in food prices was so far was only the “tip of the iceberg”.

($1 = €0.64)

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By: William Lemos
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