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U.S. Deputy Secretary of Agriculture Chuck Conner is hoping for a strong U.S. corn crop this year, but the wild weather this spring has raised concerns that yields may be short this fall.
Conner was in Des Moines Thursday speaking to livestock producers at the World Pork Expo, and he was confronted with several questions about the availability of feed in the coming months. One of the attendees at the luncheon pointedly asked Conner, "What if we have a short corn crop?"
He noted the U.S. Department of Agriculture's recent decision to open up 24 million acres in the Conservation Reserve Program for haying and grazing as a step that could help ease the pressure on feed markets. But the crowd reaction was audible when the questioner said that Conner's response wasn't an answer.
"'No answer' –I heard that," Conner said as the crowd laughed. "You know, if I had the ability to generate a couple billion bushels of corn here, I suspect you would have already seen that, so you know, I don't have an answer."
Conner fielded more questions from agriculture reporters following the luncheon, where we was asked again about the possibility of a lack of adequate feed stocks this year. "The conditions we've seen so far this spring, which have been less than ideal, were a huge motivating factor in our opening up what will amount to 24 million acres of CRP ground for haying and grazing. And you know that's unchecked, without penalty," said Conner. "While that's not the solution to the problem, we believe it could be part of a broader solution that is going to help ease some of that demand for feed grains. In the event that things continue to play out as it appears, we're going to have less than ideal conditions for getting this corn and bean crop started this year."
The USDA will be closely monitoring the progress of this year's grain crops and will consider other tactics to assist livestock producers in need of feed. "That's going to be more important than ever, to keep track of this as this fall's harvest approaches," he said. But Conner didn't seem to be too keen on the idea of relaxing the Renewable Fuels Standard to reduce demand for corn. "Let me just say, this (Renewable Fuels Standard) is part of the energy bill that we supported, and we continue to support it," he said, noting that it's very important to look closely at the facts when considering changes to the RFS. "I mean, understand, the levels of ethanol production that we're seeing in this country are market-driven. They're not RFS-driven at this point. You know, with $130-a-barrel crude, that is driving alternative production at a lower cost, and so every one of these plants that can produce is doing as much as they can because the market is telling us we need a lower-cost source of fuel here. And so it's the market that's driving that increase in capacity, which is obviously driving the greater demand for the corn as well. Not the RFS."
Conner characterized the corn ethanol industry as a "mature industry" that is seeing much greater efficiencies and is producing a competitive fuel. "This is an industry that is highly efficient, producing a low-cost product that is extremely competitive compared to petroleum-based products at this point. So I think there's no question that it's an economic force out there and I would characterize it as maturing as a result of that. It's a driver in this marketplace. And they're competing, head to head."
But new demand for corn, coupled with higher energy costs all across the board, have been causing some headaches in the pork industry. There is currently an oversupply of pork in the marketplace, which has kept retail pork prices relatively low. Conner said that the USDA recently approved the purchase of $50 million worth of pork products to help ease the oversupply. "In my remarks (to the pork producers) I tried to acknowledge that we know they're in a difficult period right now," said Conner. "Some in American agriculture are prospering, the pork industry, and a lot of our livestock industry is not. We try to acknowledge that."
"We worked with the industry to develop a plan where that ($50 million) purchase will actually be for products that are going to come from mature females from the pork sector, so in effect you will be decreasing that productive capacity going forward. That should help ease some of the oversupply situation and improve prices." Conner said that pork prices have risen $10 to $15 per hundredweight just in the last several weeks. "So things have gotten a little bit better already as a result of some of what we've done."
World hunger concerns
Conner's boss, U.S. Secretary of Agriculture Ed Schafer, is currently in Rome attending a United Nations Food and Agriculture Organization conference. Conner said global food prices are always an important consideration of the USDA. More than 40 agriculture ministers from around the world are attending the meeting, and it's important to keep the discussion based on facts, Conner said. "From our standpoint, our message is to make sure that we're dealing with facts in this situation, in terms of the real causes of the food price inflation," said Conner. "We've seen, here in this country, what could be as high as 5-percent food price inflation or perhaps a little bit higher, which I noted, is double what we've seen historically. But for those countries that have 40-percent inflation, you know, our economists have looked at this and they believe there is a culprit here or a cause that is accounting for a vast, vast majority of that, and that is rising energy prices."
"You know, it is $130 crude that is causing that food price inflation. So we want to make sure we continue to put that message out because we think there's been a lot of blame handed around here. Some of it is factual, some of it is not. We're trying to get as many of those facts on the table as we can. Similar to our announcement from a couple of weeks ago and Secretary Schafer is going to keep delivering that message over there as well because we think its an important contribution to make to this debate."
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