The Great Chicken Wing Shortage of 2013.

Commentary about business and finance.
Feb. 1 2013 3:06 PM

The Great Chicken Wing Shortage of 2013

Poultry interests point the finger at ethanol, but blame it on the rain.

Why are there fewer wings then there used to be?
Why are there fewer wings then there used to be?

Photo by iStockphoto

The Super Bowl is about football, of course, but also snacks. Primarily snacks, really. For me that means chili. But for many, it’s chicken wings—savory, substantive finger food that’s best enjoyed with a group. The National Chicken Council (yes, there’s a trade group for everything) says Super Bowl weekend is “unquestionably the biggest time of the year for wings” but is nonetheless saddened to report that wing consumption is likely to decline this year. And the council is not afraid to name the culprit—renewable fuel regulatory mandates that it says are prompting massive chicken scarcity.

By the numbers, the Chicken Council says it anticipates Americans will scarf down 1.23 billion wings while watching the big game. That’s a lot of chicken, but it would reflect about a 1 percent decline from the 2012 total.

The estimating technique here turns out to be pretty simple. It’s based on the fact that America produced about 1 percent fewer chickens over the past year than the year before. But that’s not for want of demand. The U.S. Department of Agriculture’s most recent Livestock, Dairy & Poultry Outlook report said prices for whole chickens were 21 percent higher in December 2012 than December 2011. For wings, the price increase was an even larger 26 percent year-on-year. The rocketing prices are a textbook sign of the steady or growing demand running up against a reduced stock of chickens.

Why not just raise more? Well, in the chicken industry, as in so much else of life, it takes money to make money. Specifically, you need to feed your chickens. And chicken feed is mostly corn. And corn has gotten a lot more expensive over the past year, spiking enormously over the summer and settling down only slightly as summer turned to autumn.

If you just want to buy some corn at the store, you haven’t necessarily seen a big impact, because the vast majority of commodity corn isn’t meant for direct human consumption. Instead, most corn is turned into corn byproducts or animal feed. The rising price of feed initially sent meat prices down as farmers began slaughtering more animals than usual in anticipation of higher future production costs. But now that we’re months into the new era of high corn prices, we’re seeing the downstream effects. Meat eaters are chasing fewer animals, and farmers aren’t ramping up production in response as much as you might think since production costs are still high.

The Chicken Council, along with other industry groups representing corn consumers, blame ethanol for the mess. Specifically, an EPA Renewable Fuel Standard that will require almost 14 billion gallons of ethanol to be blended in with America’s gasoline supply in 2013. In principle, that demand could be met in various ways. Brazil makes ethanol quite efficiently out of sugar cane. Here in America, though, we make it out of corn. As Robert Bryce has written for Slate, the increased ethanol demand induced by the Renewable Fuel Standard has approximately tripled the amount of corn going to ethanol production, diverting it from other uses.

Meat producers find this exceptionally annoying because there’s a basic mismatch in the relevant price elasticities. The Renewal Fuel Standard means that gasoline vendors aren’t allowed to respond to higher corn prices by reducing ethanol consumption. And while drivers do respond a bit to higher gasoline prices, most of that adjustment has to happen over the long term—people don’t just rush out and buy more fuel-efficient vehicles in response to a short-term price increase. Consumers on the food side have quite a bit more flexibility to eat less corn-fed meat, which leaves the meat industry paying a disproportionate price for the ethanol subsidies.

That said, while the ethanol mandate is bad public policy, it’s almost certainly not the main driver of high corn prices. The real issue is the massive drought that struck over the summer and left desiccated landscapes and ruined crops throughout the middle of the United States. The drought parched regions that account for almost 90 percent of America’s corn crop.

Absent the drought, it should be easy enough to respond to increased demand for corn by growing more corn. The total quantity of farmland in the United States has been on a downward path for a while, but as of March the story was about a possible reversal of that trend. Total corn acreage planted reached a high not seen since 1937, when more-primitive techniques produced lower yields per acre. But instead of the record corn crop we were hoping for, we got a corn bust thanks to bad weather. And even the most technologically advanced modern economy still rests on the rickety foundations of the weather. Rescinding or suspending the Renewable Fuel Standard might offer some relief. But when it comes to chicken wings, we’re fundamentally left with nothing better to do than pray for rain.



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