Proposed USDA Bailout for Ethanol Brings Livestock Protest

Associations say ethanol getting preferential treatment.

Published on: Oct 23, 2008

Eight major livestock organizations are protesting remarks made last week by Agriculture Secretary Ed Schafer about the use of USDA rural development loan guarantees to rescue financially strapped ethanol plants. They say Schafer's proposal would amount to a bailout of ethanol companies that speculated in corn futures.

"We in animal agriculture are particularly concerned that you would consider adding one more level of support for the corn-based ethanol industry," eight livestock organization leaders wrote to the secretary.

The letter was signed by top executives of the: American Meat Institute, National Cattlemen's Beef Association, National Chicken Council, National Meat Association, National Milk Producers Federation, National Pork Producers Council, National Turkey Federation, and the United Egg Producers.

Schafer told reporters at the World Food Prize on Oct. 17 that USDA stood ready to "support and shore up" ethanol companies impacted by volatile corn prices - apparently including those impacted by speculation in futures markets. He pointed out that some ethanol plants "got away from their focus on producing ethanol and started speculating in the commodity markets. It's hurt them."

Schafer reported some ethanol plants bought futures contracts at $7 a bushel corn, and with today's lower prices "some are stretched pretty thin. We're going to wade through some pretty difficult situations."

But, the livestock organizations challenged what they view as preferential treatment for the ethanol plants. "Many of our producer and processor members also took long positions on corn and soybeans and are paying above-market rates right now," according to their letter.

"It seems to be the opposite of free enterprise to insure companies – and only some companies – against the possibility that their speculative commodity bets might go wrong," the letter noted.

The National Grain and Feed Association has asked Schafer "to clarify" his intention to use USDA rural development loan guarantee program for rescuing ethanol plants.

Source: Feedstuffs