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Will ethanol mandate send chicken stocks tumbling?
Shares of the nation’s largest chicken producer could tumble on Friday, one day after the Environmental Protection Agency denied a request from Texas Gov. Rick Perry to cut the federal ethanol mandate in half for a year, according to an Associated Press report.
Chicken producers like East Texas based Pilgrim’s Pride are facing record-high grain costs that have made animal feed far more expensive. Prices charged to consumers aren’t rising fast enough because of an oversupply, so profits are slipping.
The company issued a statement Thursday saying it was disappointed with the EPA’s decision.
An energy bill passed in December required 9 billion gallons of ethanol to be blended into gasoline this year and about 11 billion gallons next year. Perry had asked the EPA in April to drop the Renewable Fuels Standard requirement to 4.5 billion gallons because demand for ethanol is raising corn prices for livestock producers and driving up food prices.
Clint Rivers, Pilgrim Pride’s president and chief executive officer said in a statement the company was disappointed.
He said the standard, “has caused feed ingredient prices to spiral out of control, inflicting extreme economic damage on food companies, and ultimately, on consumers, in the form of increased costs.”
The National Chicken Council, which represents the nation’s chicken producers, estimates higher feed grain prices have cost companies in the broiler chicken industry more than $6 billion since October 2006.
Rivers said in the statement the company’s feed-ingredient costs for the year are expected to be up $900 million from the previous year because of the government’s ethanol policy.
Pilgrim’s Pride’s shares fell $1.34, or 8.4 percent, to close at $14.68 and are down from a 52-week high of $41 set in September 2007.
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