Food fight divisive for farm lobby

The Nation's Business: Food fight divisive for farm lobby
Corn farmers lobby for ethanol as producers of meat and dairy products push back

By Christopher Leonard
Associated Press
Published on: 09/18/07

St. Louis —- As a chief advocate for corn farmers across the country, Rob Litterer will be working the halls of Congress this fall to push 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 a wave of prosperity for rural towns throughout the Midwest, but the energy bonanza is also pitting farming groups on separate sides of the fence.

Corn farmers are pushing for more ethanol production as the industry creates an enormous new market for their crop, giving prices the kind of lift they haven't 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 their already slim profit margins.

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

"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."

The tension between grain producers and food producers is roiling agricultural markets around the world as high oil prices spur governments to subsidize food-based fuels such as ethanol and biodiesel.

The Mexican government this week put a cap on tortilla prices after prices shot up between 20 percent and 30 percent over uncertainty that there would be enough U.S. corn available for export. Brazil will ask the World Trade Organization to formally investigate U.S. farm subsidy programs —- including payments for ethanol production. Brazil is the second-largest producer of ethanol in the world after the United States but is the No. 1 exporter of the fuel, which in Brazil is mainly made from sugar cane.

The political waves —- and their effect on government policy —- can mean life or death for the budding biofuels business. 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 7 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.

"It's very true that the agricultural lobby will speak with a louder voice if it's saying the same thing. In that sense, it's been a less united voice than it has in the past," said Pat Westhoff, an economist at the University of Missouri.

Westhoff said it's inevitable that a rise in corn prices will increase the cost of food. Corn and its derivatives, such as corn syrup, are staples for a variety of foods, including soft drinks and wheat bread.

But a $6 billion increase in the cost of corn —- which amounts to about $1 a bushel —- would still only raise food costs about 1 percent, he said.