Derrick Calloway's List: Ethanol

More corn for ethanol producers, of course, means less for livestock. Ranchers in wide-open Western states and pig farmers in the rural stretches of the South and Midwest are finding their businesses slammed by policies cooked up in Washington.

Hitch says the feedstock that's primarily made from corn is the single biggest expense for his business. As corn costs have doubled, meat packers and processors like Tyson Foods (TSN) and Smithfield Foods (SFD) have to pay more for the animals they buy.

"The current approach and pace is full of risks to traditional users of feedgrains," Matthew Herman, a Tyson Foods manager, told a House subcommittee earlier this month. "Without adequate safeguards for the unintended consequences, the future of U.S. animal agriculture is put in great jeopardy."

Yet while the influence of ethanol's enemies isn't great now, their cohesiveness, and their power, is growing. For two days earlier this month, the NCBA, the National Chicken Council, the National Turkey Federation, and the National Pork Producers' Council testified before Congress, calling for the end of corn ethanol subsidies.

Left-leaning economists such as Princeton University's Paul Krugman are joining free-market fundamentalists at the Cato Institute in pointing out the economic pitfalls of ethanol. And green groups worry that aggressive production of corn could have dire consequences for the environment, because of the heavy use of pesticides, fertilizer, and machinery that burns fossil fuels. "There's great concern," says Doug Koplow, who analyzes energy policy for Earth Track, a Boston consultancy.

The opposition groups haven't worked together before this year, but Hitch says the NCBA is now beginning to reach out to other groups in an effort to coordinate lobbying and other activities. On Mar. 16, representatives of the ranchers, chicken farmers, pork processors, and milk producers held a joint conference call to discuss strategies for addressing the ethanol issue. They agreed to form an ad hoc group, which has not been publicly announced, to launch an informational Web site and to work toward the inclusion of measures to eliminate domestic ethanol subsidies and tariffs on Brazilian ethanol in the Farm Bill expected later this year.

Ranchers and other opponents say they're determined to get the government to change its policies, however long it takes. "This ethanol thing is driving everybody half nuts," says Hitch. "As far as presenting a united front on this issue, we certainly can and will."

Ethanol has plenty of support in Washington. Besides Bush's call for sharply boosting output during his State of the Union (see BusinessWeek.com, 1/24/07, "Salesman In Chief"), Hillary Clinton, senator from New York and Presidential contender, has reversed her previous position to support ethanol subsidies.

Barack Obama, another Democratic Presidential hopeful, is on board. Even John McCain, a vocal critic for years, is reconsidering his opposition as he tries to snare the Republican nomination. Archer Daniels Midland (ADM), the agribusiness giant and the largest ethanol producer, is a formidable lobbying force in the capitol, after having handed out millions of dollars in political contributions over the last three decades.