Johanns- Ethanol squeezes ag

WASHINGTON (AP)--Soaring corn prices are squeezing meat and milk producers, but consumers won't necessarily see higher prices at the grocery checkout, U.S. Secretary of Agriculture Mike Johanns said in an interview Dec. 14.

Costly corn has made it more expensive to feed cows, chickens and pigs. Demand for ethanol, a fuel made from corn, has pushed the price of corn above $3 a bushel, the highest level in more than a decade.

That is bound to have an impact on farms and ranches, Johanns said.

"My best projection is that for a couple of years here, you are going to have a tug-and-pull between various industries," Johanns told The Associated Press.

Because so many factors go into making food, consumers probably will not see a direct impact, he said.

"I just would hesitate to pick any item at any one time and say to the consumer, 'It's the fault of this item that you're going to be paying a higher price,"' Johanns said. "There's just too many factors that can impact the price, both up and down."

There will not be less corn for people to eat--field corn for livestock and fuel is different from sweet corn, the source of corn on the cob and canned or frozen corn.

Chicken companies are hoping to pass at least some of the high feed costs onto shoppers, despite resistance from supermarkets and fast-food chains, said Richard Lobb, spokesman for the National Chicken Council.

"It's very competitive--we don't have the kind of captive market that some interests do," Lobb said. "We have to compete with pork and beef, for example. If they're not going up, it's hard to raise chicken prices."

Lower chicken prices, disruptions in the global market from bird flu and higher fuel and feed costs made for a tough year in the chicken industry.

"The best thing I can say about fiscal 2006 is, it's over," Tyson Foods Inc., Chief Executive Richard L. Bond said in a news release.

After posting a $117 million profit one year ago, the company reported losses of $235 million.

People eat more chicken than any other meat in the U.S., according to the U.S. Department of Agriculture. The average person is expected to buy 87.5 pounds of chicken this year, compared with 65.4 pounds of beef and 49.4 pounds of pork.

Next year, people are expected to buy slightly more beef and pork and slightly less chicken, according to department estimates.

Ethanol doesn't gobble all the corn--corn kernels minus the starch are left over and can be fed to livestock, primarily to beef cattle. Still, the shakeup in the corn market has sent the beef industry reeling, said Gregg Doud, chief economist for the National Cattlemen's Beef Association.

"This transition from corn to ethanol byproducts probably amounts to the biggest structural change in the cattle feeding business in at least 50 years," Doud said.

The industry is struggling to figure out how to transport huge quantities of these byproducts, instead of corn, to the Texas Panhandle and southwest Kansas, where most cattle are fed, Doud said.

But it is chicken and milk prices that might rise very slightly in the coming year, because of higher feed costs as well as cutbacks in production, said Keith Collins, the department's chief economist.

"Surely we see that higher feed costs, over time, ought to be factored into higher retail meat costs," Collins said.

"The effects are going to depend on how the ethanol story plays out over the next two years," Collins said. "It's going to be a function of how much more readily can we attract more land into corn production, what kind of corn yields we see, what kind of global demand will there be for corn. There are a lot of variables."

The agriculture secretary said another important factor is an effort to develop crops besides corn, such as switchgrass, that can be converted to ethanol.

"The marketplace does adjust," Johanns said. "Sometimes, it does take time."

Date: 12/21/06

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