Indiana egg producer Bob Krouse says he's got quite a story about the downside of ethanol. The capsule version? Ethanol is using too much corn that his hens need. But to understand that, he says I've got to see his birds first. Krouse: We require anybody outside the company going into the laying houses puts on protective clothing. And with that he draws out a white paper jumpsuit to go over my clothes. It protects chickens from germs I might carry. But I don't mind looking like a hazardous waste technician.
ZIPPING SOUND
Allee: So where are we?
Krouse: We're in one of our newer egg-laying houses this was just completed last year. We got in the neighborhood of three hundred thousand birds in this house.
Allee: I'm looking down this direction I'm telling you this building is so long and so large that there's a mirage.
Krouse: Yeah, there is. It's the heat coming off the birds. You can get a little closer to them this direction.
Krouse leads me down a yawning aisle of chicken cages. White Hens are pecking away at the cages' metal tray.
Allee: And there's their feed in the trough. Looks like a powder almost.
Krouse: Yes, Primarily it's corn, soybean meal, calcium, salt, typically some other protein.
Allee: Why is it that corn is sixty percent of your mix?
Krouse: They can eat a lot of things that will provide the proper amount of nutrition. But in the Midwest there's so much corn, it's always your least expensive base ingredient.
Or at least, corn was cheap. Lately, Krouse has been fretting about high corn prices. To lay eggs, these hens need 264,000 pounds of corn every day. He's paying forty percent more for corn than last year … and that's wiping out his profits. You see, egg producers have a new competitor for corn - ethanol. Distilleries use corn to brew ethanol. And lately those plants are running overtime.
Krouse: Then you start taking it a little more seriously and think, holy cow, what are we going to do? We have living animals to take care of, so we've got to feed them every single day. And we are going to outbid the ethanol plant, there's no way around it, we have to.
So, what options do egg producers like Krouse have? Well, some have raised prices. But Krouse's customers are big, competitive chains like Wal-Mart.
Krouse: We can't call the customer and say, hey, I'm losing money on every dozen eggs that I sell you, can you help me out?
The other option is to bleed money … and wait.
Krouse: Honestly, you just hope you can manage your operation and be more efficient than other people, so you'll survive long enough to where it will be profitable again.
Actually, that's how the egg industry works these days. When feed costs rise, more producers go out of business. Krouse weathered many price spikes. But ethanol could keep high prices around for a while.
Krouse: People will be getting chewed up and spit out over the next three years as this whole thing sorts itself out. That's what worries me the most, is … it's odd, but it seems like people haven't done enough homework on ethanol.
Brown: I've been aware of this potential for a long time.
This is Lester Brown. He heads the Earth Policy Institute, a green think tank.
Brown: It was in 1980 or so when I first did a monograph. It was called something like growing competition between fuel and food.
Brown penned his critique shortly after the government started subsidizing ethanol. He made a simple observation: American livestock require huge amounts of corn.
Brown: If you open your refrigerator door you see milk and eggs, cheese, chicken, pork, beef, yogurt, ice cream. These are all corn products. Your refrigerator is stuffed with corn.
So, as an example, it takes more corn to produce one of Krouse's eggs than there is in a serving of corn flakes. And again, if corn prices rise, food producers like Bob Krouse take a hit … or, consumers pay more. Brown warned about this in the 80s, but he was ignored, mostly because ethanol markets sputtered. Recently, though, high gasoline prices made ethanol attractive. That dragged the fuel into the mainstream.
Brown: And because the markets has been driving investment, Washington has sort of lost control of the program.
And Washington makes no apologies.
Johanns: It's a free market, I mean, this is America.
US Secretary of Agriculture Mike Johanns says cheap corn came at the expense of corn farmers. Growers could barely cover their costs. Now, there's a level playing field.
Johanns: Part of what you're realizing here is that you've all of a sudden got a new kid on the block, and they're buying corn. You know we don't sit down here at USDA or the White House and say let's do a million bushels of corn over here, and two million bushels of corn over there.
That's the rhetoric, but the policy is more complicated. President George Bush wants even more ethanol at the gas pump. Here's the president's state of the union address.
President Bush: To reach this goal, we must increase the supply of alternative fuels, by setting a mandatory fuels standard to require 35 billion gallons of renewable and alternative fuels in 2017 -- and that is nearly five times the current target.
The government hopes to sidestep corn with new technology … it's called cellulosic ethanol. The President explains …
President Bush: We must continue investing in new methods of producing ethanol - (applause) -- using everything from wood chips to grasses, to agricultural wastes. We made a lot of progress, thanks to good policies here in Washington (FADE DOWN)
But chemists haven't figured out how to make cellulosic ethanol cheaply. So, for now, the domestic ethanol industry's stuck with corn. The industry says it can live with that. Bob Dinneen leads the Renewable Fuels Association. Dinneen says this year … everyone's paying nearly four dollars for corn … including ethanol plants.
Dinneen: OK. Last summer, it was two-dollar corn. No one was complaining back then, but you know what? I don't think it's necessarily a great thing in this country to be promoting policies that would drive down the price of corn. Corn's probably been undervalued for too long.
Now, corn growers see dollar signs, and they're planting millions of new corn acres. That's softened corn prices a bit. Dinneen says it all shows the system works.
Dinneen: I think people just need to give the marketplace time to adjust, to breathe.
Brown: The question is - what are the social costs.
Again, environmentalist Lester Brown.
Brown: How many poultry farmers are going to be in business at this time next year, and how many will be forced out. It's getting pretty hairy.
Egg producer Bob Krouse says the recent ethanol boom's got him thinking. There're questions beyond just dollars and cents.
Krouse: We've only got so much corn. It seems foolish to take this much food and then go and burn it in our cars. It just does not make sense to me, and to trade energy independence for food independence would be horrible. We might never have to make that trade if cellulosic ethanol comes online.
But until then Bob Krouse says he's got millions of hens to feed, and worries they'll become a casualty of a clean energy future.
I'm Shawn Allee. Chicago Public Radio.
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