Overview of the Renewable Fuel Standard
Stakeholders Perspective
Hearing of the Energy and Power
Subcommittee
House Committee on Energy and Commerce
William P. Roenigk
On Behalf of the
National Chicken Council
Wednesday, July 24
Rayburn House Office Building
Washington, DCGood afternoon, Chairman Whitfield, Ranking Member Rush, and Members of the
Subcommittee. Thank you, Chairman Whitfield, for the opportunity to participate
in the critically important and most timely hearing on the Renewable Fuel
Standard.
My name is William “Bill” P. Roenigk. I was, until very recently, the Senior Vice
President of the National Chicken Council and am now a consultant to the
Council. The statement is presented on behalf of the National Chicken Council,
which represents companies that produce and process over 95 percent of the
young meat chickens (broilers) in the United States. The Council’s
producer/processor members are proud to provide on a consistent basis
wholesome, high-quality, affordable chicken to both consumers at home and
abroad. About 20 percent of the U.S. chicken supply is exported to the very
competitive world market.
About 40 vertically-integrated chicken companies that are federally-inspected
comprise the U.S. industry. Since 2007, all of these companies, at times, have
struggled financially. Some have struggled longer and more severely than others.
Chicken companies have been economically-squeezed for much of the past six
years. Rising feed costs for much of the past six years have out-paced the ability
of companies to pass on these higher feed costs in the form of higher prices these
companies receive for their chicken products. At least a dozen companies have
succumbed to the severe cost-price squeeze by ceasing operations or having to
sell their assets at fire-sale values, in some cases to foreign owners. The business
disruptions directly impact the over 25,000 family farmers who grow the chickens,
and the more than 300,000 employees directly working for the chicken
companies.
Since October 2006 through this month, July 2013, poultry and egg producers
have had to bear the burden of higher feed costs totaling over $50 billion. The
$50 billion higher feed costs is not the total feed bill, but rather the increase over
feed costs if corn and soybean meal prices had remained somewhat steady at the
pre-2006 levels. It is an understatement to say “it has been difficult to pass this increased cost on to the chicken buyers,” whether they are supermarkets,
restaurants, further processors, or buyers overseas.
As troubling as the higher feed costs have been, an even more difficult challenge
is the much greater volatility experienced in corn prices over the past six years.
There is no futures market for chicken so establishing a hedge position including
corn, soymeal, and chicken is not possible. The market risk for chicken is carried
by the chicken companies. If you, as a chicken producer, guess wrong on the corn
and/or soybean meal prices, you can pay a very heavy financial penalty compared
with your competition who may have luckily guessed more correctly on the
commodity market.
As Subcommittee Chairman Whitfield noted in the announcement about today’s
hearing the “Renewable Fuel Standard is a broad and complex statute… now is
the time to take an in-depth look at the RFS and compare our original expectation
for the program with the actual experience.” Permit me to add that the RFS
statute in the Energy Independence and Security Act of 2007 is not just broad and
complex, but also a statute that has outlived its usefulness, if, in fact, the
conventional fuels component of the RFS even did have any usefulness. The
actual experience of implementing the RFS has, unfortunately, been very much as
those of us in animal agriculture expected. Our negative expectations have, for
the most part, been exceeded and exacerbated by the impact of the short-falls of
the corn crop for the past three years.
Proponents of having a government mandate that requires a major quantity of
corn to be used to manufacture ethanol whether or not there is an adequate
supply of corn apparently had expectations that optimum weather conditions for
producing corn and competing crops would be the norm every year. Recent
history for the corn harvest has certainly proven otherwise.
Some groups have characterized the position of the National Chicken Council and
our sister organizations in animal agriculture as being anti-ethanol. This
conclusion is a mis-characterization. We are not anti-ethanol. Rather, we believe the government should stand aside and permit the market to move the United
States toward greater energy independence. The negative and, perhaps,
unintended consequences of forcing a move too far and too fast with corn-based
ethanol have become overly clear and overly painful. It has also become overly
clear and apparent that there is no workable or reasonable provision in the RFS to
provide flexibility when the corn supply is severely inadequate to meet all needs.
It is important to note that the Renewable Fuel Standard is a misnomer. That is,
“renewable” implies that there is an abundance of some natural resource that
provides an unending supply of some product. Applying over 200 pounds of
commercial nitrogen fertilizer to achieve a corn yield of 160 bushels per acre does
not qualify corn to be considered “renewable.” Without the application of
fertilizer, yields of corn would be one-half and if not applied again the next year,
the yield would be reduced by another one-half.
In short, the Renewable Fuel Standard, at least for conventional biofuels, is
broken beyond repair. It is most imperative and important at this time for
Congress to take a critical, hard look at the RFS. If Congress concludes, as we do,
that the RFS cannot be fixed because it is broken beyond repair, then Congress
must do the right thing.
The National Chicken Council looks forward to working with the Subcommittee
and others in Congress to repeal this very broken and irrepairable legislation.
Thank you again, Chairman Whitfield, ranking Member Rush, and Members of this
Subcommittee for the opportunity to participate in the discussion today so that
our thoughts and recommendations could be shared