At first glance, ethanol looks like a cure to all of America's energy woes. Since it's made from plants, it's a renewable resource. And advocates say that the clean-burning fuel can help the country become less dependent on foreign sources of oil. Just consider Brazil — the country became energy-independent last year, due in large part to its 30-year effort to make more ethanol out of sugar cane.

These arguments helped inspire a part of the 2005 Energy Bill that mandates the production of 7.5 billion gallons of the stuff each year by 2012, with the federal government assisting through a hefty combination of subsidies for corn growers and tax breaks for ethanol producers and blenders.

Unfortunately, what sounds great in theory hasn't worked out so well in practice. Notably, one unintended and perhaps congressionally unanticipated consequence of the ethanol boom this year has been a massive spike in the price of corn used in animal feeds, which is already being priced into the cost of chicken, pork and dairy products (see “Soaring Corn Prices Impact Meat Production,” SN Feb. 26, Page 35).

“The cost of corn is at $3.75 for December delivery,” Richard Lobb, communications director for the Washington, D.C.-based National Chicken Council. “We were paying less than $2 last summer. And as the cost of corn goes up, we're going to start seeing the cost of other things go up.”

The U.S. Department of Agriculture has estimated that, due to these high prices and strong demand, more corn will be grown this year than at any time since 1944, but even this may not be sufficient to meet the demands for food, fuel and export, Lobb added.

“There will be enough corn, but at a high price,” he said. “As a result, our [member] companies are clearly cutting back. Some of the big ones have announced specific targets for reducing poultry production.”

Similarly, feed costs account for about 60% of the average pork producer's total costs, and while the longer gestation cycle of hogs compared with poultry has ensured that plenty of pigs will be headed to market this year, slaughter weight is expected to be below normal.

“Hog weights have been creeping up for a long time now as producers have become more efficient,” explained Karen Boillot, director of retail marketing for the Des Moines, Iowa-based National Pork Board. “What we're anticipating now is that hog weights, for the first time in quite a while, will moderate or decline.”

Noting that pork and chicken producers are almost entirely dependent on corn and soybeans — a crop that will likely cede significant acreage to the ethanol boom — for feed, Boillot said that these two industries will likely be hurt more by the price of corn than the beef or dairy industries.

Yet dairy prices are spiking as well, despite ranchers and dairy operators having the option of feeding their herds more forage, or mixing distillers' grain — a cereal byproduct of ethanol and alcohol production — into their feed.

“Milk prices are going up rapidly, in almost a non-fundamental manner,” noted Ed Jesse, a dairy economist at the University of Wisconsin, in a telephone interview arranged for SN by the Wisconsin Milk Marketing Board. “We've got an increase in cow numbers, and milk production does not appear to be sliding, but it looks like we're going to see what appear to be nearly record prices by early fall.”