Farmer vs. farmer over ethanol boom

ST. LOUIS - As a chief advocate for corn farmers, Rob Litterer will work the halls of Congress this fall for increased ethanol production. But he's facing stiff opposition from what on the surface seems an unlikely source - the farm lobby.

The burgeoning ethanol industry is creating prosperity for rural towns throughout the Midwest, but it is also pitting farming groups against each other.

Corn farmers are pushing for more ethanol production as the industry creates an enormous new market for their crop, giving corn prices the kind of lift they have not seen in years. But the corn farmer's win is the hog farmer's loss. Meat, dairy and other food producers are pushing back against the ethanol boom as higher grain prices cut into already slim profit margins.

So as Litterer, incoming president of the National Corn Growers Association, visits with members of Congress, he knows that meat and dairy lobbyists will be close behind, delivering the opposite message.

"There is no question they have a policy that they are opposed to an increase," Litterer said. "But I don't think their opposition carries any water."

Ethanol and biodiesel served a niche market before the U.S. government imposed a mandate - called the Renewable Fuel Standard - requiring the United States to use seven billion gallons of renewable fuels by 2012.

This fall, Congress will consider a new fuel standard that could boost production as high as 36 billion gallons by 2022. But the future of that bill is uncertain because of the food fight shaping up between grain producers and livestock lobbyists.

It is inevitable that a rise in corn prices will increase the cost of food, said Pat Westhoff, an economist with the Food and Agricultural Policy Research Institute at the University of Missouri. Corn and its derivatives, such as corn syrup, are staples for a variety of foods, from soft drinks to wheat bread.

But that does not mean the average person will notice a price increase at the grocery store, Westhoff said.

U.S. consumers spend about $700 billion a year on food. A $6 billion increase in the cost of corn - which amounts to about $1 a bushel - would still raise food costs only about 1 percent, he said.

But the pain is more acute for corporations like Tyson Foods Inc., the nation's largest meat company.

Part of Tyson's problem is higher grain prices - the company said grain costs for its chicken feed shot up $113 million in the third quarter of this year alone when compared with the year before.

The American Meat Institute has joined dairy, egg and turkey lobbyists to fight any increase in ethanol mandates that could divert yet more feed into fuel refineries.

Litterer said fears of rising corn prices were overhyped. While prices did spike between 2005 and 2007 about $1 a bushel, that does not mean they will keep rising, he said. The higher prices have induced farmers to plant more, which increases supply and brings the price back down.

While meat companies are seeing profit dwindle, rising grain costs are not causing them to lose money overall, said Terry Francl, senior economist with the American Farm Bureau Federation.

Demand for meat remains relatively steady despite modest price swings, which means most of a meatpacker's rising feed costs can be passed to consumers, he said.

Francl emphasized that he was not choosing sides in the argument between the Farm Bureau's members who raise livestock or grow corn.

"It's one of the many delicate situations we face" as an umbrella group for farmers, Francl said. "I am not trying to judge one vs. the other."