How Poultry Farms Can Beat Profit-Draining RFS Regulations

Solar Energy Gives Farmers an ‘End Around’ on Increasing Feed Prices

The Renewable Fuel Standard was originally an attempt to help the US achieve energy independence from foreign oil, and to improve air quality. But it has morphed into a major profit-inhibitor for farm producers like poultry farmers.

The good news for poultry farmers is, there’s an easy way to defray those costs and achieve energy independence and freedom at the same time.

If your feed costs have been rising and you weren’t sure why, what you’re about to read might be the cloud-parting answer you’ve been seeking.

What is the Renewable Fuel Standard (RFS)?

The RFS requires certain percentages of corn to be designated for use in ethanol production. These percentages have increased continually over time. Like many government actions, the motives for the RFS started out good – liberate the U.S. from dependence on foreign oil by producing more of our own fuel.

Since ethanol is a major component of gasoline and ethanol can be derived from corn, this seems like a smart idea. The RFS has been in effect since the mid-2000s, but converting corn to ethanol, also known as biofuel, has been around much longer.

But what started out as a means to energy freedom has turned into another loss of freedom for farmers.

How Does the RFS Hurt Poultry Farmers?

Corn is one of the primary feeds used by poultry farmers, as well as for most other forms of livestock. With more and more corn now being set aside for biofuel (45% according to this article), the price of corn feed has worsened due to an ever-tightening supply coupled with increased demand for chicken worldwide.

And because so much corn has to be planted to meet the biofuel mandates, fewer soybeans have been planted, causing those costs to rise as well.

The result? Vastly higher costs for feed. This has had two major consequences. First, exports of feed are down, hurting profits from that sector. Second, poultry farmers and other farms who buy corn and soybean feed have faced rising prices.

What happens if they just pass those increased costs on to consumers? Will consumers spend a little more for chicken? This graph from a FarmEcon report suggests that strategy won’t work:

graph showing how renewable fuel standard led to lower poultry consumption

The green line shows consumer spending on poultry, in dollars. The blue line shows poultry consumption, in pounds. The lines began diverging sharply in 2006 when the RFS took effect, and have continued this trend.

What does that mean in layman’s terms? It means people are spending the same amount on poultry, but eating less of it. Less consumption means lower profits. And that’s why some poultry farmers have had to close their poultry houses or sell out to bigger corporations who can manage the increased costs a bit easier.

How to Use Solar Energy to ‘Punch Back’ Against the RFS

A typical poultry house costs thousands of dollars per year to operate. This includes electricity, supplies, equipment, repairs, cleanouts after each flock (usually 5 or 6 per year), and other costs.

But electricity is typically the highest of these variable costs. One Maryland farm featured in a May 2010 report1 spent over $13,000 on electricity per year for a two-house poultry farm. These costs are fairly typical, but will be higher today since that report was from 2010.

What if a poultry farmer spending $13,000 per year on energy could reduce that to $3000?

If you could save $10,000 per year on energy, you’d save $100,000 in ten years, and $200,000 in twenty.

How much corn feed can you buy, even at the regulation-bumped prices due to the RFS, for that amount of money?

Cutting your energy costs by $10,000 or more a year is very possible with solar energy, and more affordable than you might think. Poultry houses are especially suitable for this because of their long flat roofs and traditional wide open spaces. Lots of sunlight, no obstructions, easy to install.

Anyone installing solar panels can save 26% through the federal Investment Tax Credit (ITC). But many farms can save even more through the USDA REAP,  a program specifically created to help farmers reduce energy costs.

Here’s how you can look at this: A government regulation is killing your profitability by raising the costs of feed. But with the REAP and the ITC, you can use another government program to cut your energy costs and attain farm energy independence.

Later, if the RFS eventually gets amended or removed (which is possible because of increasing anger about its economic effects and questionable environmental benefits), then you’ll get the double bonus of lowered feed costs and the slashed energy expenses made possible by your solar array.

When it comes to poultry farms, solar energy is a win-win. And instead of getting frustrated about regulations like the Renewable Fuel Standard that you can’t do anything about at the moment, solar power gives you a way to cut your expenses now, saving you six figures (or more for large farms) over the long term operation of your farm.

Ready to talk solar with a poultry farm solar specialist? Contact our sister company Ag Solar Solutions, today.

 

1. An Assessment of the Potential Profitability of Poultry Farms: A Broiler Farm Feasibility Case Study

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