On The Money: Ethanol Production Running Out Chicken Farms?

By Mike Luery

In the fight for energy independence, there's a big battle over ethanol, with California taking center stage -– and billions of dollars at stake.

Ethanol supporters call it the cheapest and one of the cleanest motor fuels on the planet -– a key ingredient to energy independence.

"We're producing the amount of ethanol in the United States today that is equivalent to the amount of oil that we import from Saudi Arabia," said Neil Koehler, the chief executive officer of Pacific Ethanol in Stockton.

Pacifid Ethanol has hired more than 40 workers at the Stockton facility. But for years, ethanol has been supported by billions of taxpayer dollars through the use of subsidies amounting to 45 cents a gallon at the pump. Critics say the federal government has created an artificial market for ethanol by requiring the production of 12 billion gallons of renewable fuel this year. As a result, corn that used to be grown for livestock is now being diverted into ethanol.

"We certainly believe the price of corn has gone up because it's used for ethanol for fuel," said Bill Mattos, president of the California Poultry Federation in Modesto.

Of course there are other factors at play, including the price of oil and increased demand from China. But the price of corn for chicken farmers has gone up dramatically nationwide, from $2.55 a bushel in October 2006 to $5.92 a bushel in October 2011, according to the U.S. Department of Agriculture. Central Valley farmer Andrew Carlson of Fulton Valley Farms told CBS13 the corn he feeds his chickens has gone from $3 a bushel to nearly $8.

"So we're looking at a nearly tripling of the cost of the commodity in just the last three to four years," Carlson said.

Carlson's family has owned his chicken farm in Gustine for three generations.

He said the high price of corn has forced a difficult decision.

"We had to sell to a company based out of China," Carlson told CBS13.

Carlson said 185 people will lose their jobs and he contends ethanol subsidies are squeezing Central Valley farmers out of business.

"I expect some bigger companies within the next year could file for bankruptcy or consider to go out of business, just because of this ridiculous cost of feed," Mattos said.

Congressman Jeff Denham, a Republican from California's 19th District, is concerned.

"We need to cut the subsidies out in the farm belt," Denham said.

Denham wants to kill the government mandate to use more renewable fuels.

"We need to be focused on job creation and we can't afford to have government pick winners and losers in the marketplace," Denham told CBS13.

But Neil Koehler of Pacific Ethanol strongly disagrees.

"Ethanol, contrary to what some, including Congressman Denham, would say that it's killing jobs, the ethanol industry is a job creator," Koehler said.

Ethanol supporters say their industry is providing 500,000 jobs across the country, but chicken farmers believe that growth is coming at their expense. California's powerful agriculture industry is divided over ethanol -– a fuel that's now found in 10 percent of all the gasoline nationwide.

American taxpayers shell out an estimated $6 billion each year for ethanol subsidies, but that program is set to expire by the end of the year. Ethanol producers say they're ready to compete in the free market without taxpayer support.

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