From The Times Online April 12, 2007
Carl Mortished, International Business Editor
The price of meat is set to rise in America as the nation’s helter-skelter dash to convert corn into road fuel begins to take its toll on the supply of food.
The US Department of Agriculture has said that meat supply will fall this year because of the high cost of feed. Output of beef, pork and chicken is expected to decline by one billion pounds as farmers react to the soaring cost of feeding their livestock.
Typically, meat production in the United States rises by about 2 per cent a year, but the pressure from American ethanol producers manufacturing road fuel from corn has sent the price of maize soaring to $4 a bushel.
The USDA is predicting that the 2006 corn crop will sell for an average of $3.10 a bushel at the farm gate, the highest for a decade. Faced with extortionate feed costs, cattle and poultry farmers are rearing fewer animals and slaughtering them early. That means a sudden reversal in the annual meat production gain, representing a fall of 1.7lb per person.
“There is a new demand component,” Shayle Shagam, a livestock analyst at USDA, said. “Livestock producers have to bid against the ethanol industry to get supplies of corn.”
The biofuel revolution’s unpleasant negative consequence was first felt south of Rio Grande, when the escalating price of corn affected a food staple. Mexico’s tortilla inflation crisis is spreading north to the heartland of rib-eye steak and chicken wings. The USDA predicts that food prices will rise by up to 3.5 per cent this year as farmers rein in output in response to feedstock costs.
In Washington, the International Monetary Fund added its warning about the consequences of a mass conversion of food crops into fuel. Mounting political panic over carbon emissions has encouraged politicians in European and America to raise targets for the biofuel content in a litre of petrol.
Food prices rose by 10 per cent worldwide in 2006, said the IMF in its World Economic Report, owing to a surge in corn, wheat and soybean prices. The pressure on prices will increase, says the IMF. The EU’s target of a minimum biofuel content of 10 per cent will require 18 per cent of agricultural land to be set aside for road fuel production.
Corn is a vital component of the human food chain, used as cornmeal for baking bread and tortillas, as cooking oil and corn syrup in processed foods and as animal feedstock. Vast US government subsidies for the production of ethanol, used as a petrol additive in America, has encouraged the expansion of ethanol distilleries.