Ethanol waiver requested by livestock groups
As corn prices surge higher due to drought and a diminishing supply, several livestock groups are requesting the federal government consider an immediate waiver of the Renewable Fuel Standard (RFS) that dictates the production of ethanol - most of which is made from corn in the United States.
A coalition of meat and poultry groups last week asked the U.S. Environmental Protection Agency (EPA) to waive the federal mandate, which determines how much of the renewable fuel must be blended into gasoline each year.
"I support American ethanol and what it has done for rural communities in Nebraska and in many other states throughout the country," said J.D. Alexander, a Nebraska cattleman who is president of the National Cattlemen's Beef Association (NCBA.)
"What I do not support are federal mandates picking winners and losers and a federal government sitting patiently by, forking over taxpayer dollars to artificially inflate the price of corn for livestock producers and other end-users," he said.
"I find it concerning to the viability of the livestock industry that these mandates are allowed to continue today in the worst drought I have seen in my lifetime. This isn't rocket science. Implement the law, waive the RFS, let the market work and embrace free market principles."
The NCBA was joined by the other livestock groups in petitioning EPA administrator Lisa Jackson for a waiver "in whole or in substantial part" of the amount of corn ethanol that must be produced under the RFS for the rest of this year and for part of 2013 - a year from the date of the waiver's effective date.
The petition was also signed by the American Feed Industry Association, American Meat Institute, American Sheep Industries Association, California Dairy Campaign, Dairy Producers of New Mexico, Dairy Producers of Utah, Idaho Dairymen's Association, Milk Producers Council, National Chicken Council, National Pork Producers Council, National Turkey Federation, Nevada State Dairy Commission, North American Meat Association, Northwest Dairy Association, Oregon Dairy Farmers Association, Southeast Milk Inc., United Dairymen of Arizona and the Washington State Dairy Federation.
Mandates for corn to be used for ethanol production shouldn't be allowed to continue as the worst drought in 50 years goes on, said Alexander.
The RFS requires 13.2 billion gallons of corn-based ethanol to be produced in 2012 and 13.8 billion gallons in 2013, amounts that will use about 4.7 billion and 4.9 billion bushels, respectively, of the nation's corn.
Livestock producers noted, in making this request of the EPA, that when the law was written the waiver was included for times when conditions were as serious as they are this year. If it isn't used now, when would it be they asked.
Some market forecasts estimate that the U.S. corn crop may be as small as 11.8 billion bushels this year due to the drought, compared to about 13 billion bushels that were harvested last year.
If that happened it would mean that ethanol production would use about four of every 10 bushels produced in the country, the groups said.
"America's pork producers are extremely worried, given the drought affecting much of the corn-growing regions, about having feed for their animals," said NPPC President-elect Randy Spronk, a producer from Edgerton, MN, during a conference call with reporters.
"Their anxiety is compounded knowing that the RFS requires corn ethanol to be produced no matter what. We're asking EPA to give livestock and poultry producers and, ultimately, consumers a little help," he added.
The RFS has "directly affected the supply and cost of feed in major agricultural sectors of this country, causing the type of economic harm that justifies issuance of an RFS waiver," said the coalition in its petition.
The groups noted that the EPA was granted the authority in the 2005 Energy Policy Act, which set the initial RFS, and in the 2007 Energy Independence and Security Act, which expanded the fuels standard, to waive the standard because of severe economic or environmental harm the annual volume of renewable fuel that must be produced.
It was the first time a waiver of the ethanol mandate has been requested.
In asking Jackson to take prompt action to provide some possible relief for livestock and poultry producers, the coalition petition said, "it is abundantly clear that sufficient harm is occurring now and that economic conditions affecting grain supplies and feed prices will worsen in the months ahead. Both conditions provide an independent basis for a waiver of the RFS."
"Relief from the RFS is extremely urgent," said Michael Welch, president and CEO of Harrison Poultry in Bethlehem, GA and past chairman of the National Chicken Council.
"This very short corn crop will undoubtedly prove to be devastating to the animal agriculture industry, food manufacturers, foodservice providers and consumers. Thousands of jobs, a continued upward trend of rising food prices and the livelihoods of family farmers are all at risk. The chicken industry is urging EPA to implement the law and promptly grant a full or partial waiver of the RFS. If not now, when?"
John Burkel, a Badger, MN turkey grower and vice chairman of the National Turkey Federation said he buys about 100,000 bushels of corn each year to feed his poultry.
"My family's livelihood is being threatened by the looming drought disaster," he said. "The EPA granting a waiver from the RFS is needed now. This is the only immediate relief for this country's livestock and poultry producers. We need to stabilize the markets. The reality is, at these volatile, high prices, even the most prudent, cautious farmer can find themselves out of business."
While the coalition of livestock groups petitioned for the ethanol waiver, others defended the ethanol industry and noted that a change in the RFS isn't likely to produce the improvement that livestock producers would need.
Roger Johnson, president of the National Farmers Union (NFU) cited a study from the Center for Agriculture and Rural Development at Iowa State University showing that reduction, revision or repeal of the RFS would not achieve the stated goals of the industries calling for such action.
The study shows that eliminating the RFS would reduce corn prices less than five percent, Johnson said.
In addition to the waiver petition from the livestock groups, there are also members of Congress who are proposing legislation that would alter the RFS.
Johnson said his organization opposes S. 3428, the RFS Flexibility Act that would require a biannual review of corn stocks and use ratios and would created certain thresholds. If the ratios fell below certain levels the RFS would be reduced.
"Rather than dramatically altering the RFS, we need to look at alternative options," Johnson said.
One such idea, he said, would be the Market-Driven Inventory System (MDIS), which would reserve grain during periods of high production and low prices so that it can be used during times of low production and high prices, as seen now.
"This is a more sensible approach to saving taxpayer dollars than attacking the RFS," Johnson added.
The Renewable Fuels Association, (RFA) a lobbying group on many ethanol issues, said that the RFS is already pretty flexible and the waiver requested from the EPA wouldn't "result in any meaningful impacts on corn prices."
"We fully expect Administrator Jackson to deny any waiver request," said Bob Dinneen, RFA president and CEO. "A dispassionate review of the facts can lead to only one conclusion: a waiver of the RFS would simply reward oil companies that have long sought to repeal this very important and successful program. The RFS has reduced our dependence on imported oil and saved consumers at the pump.
"This summer's hot, dry weather conditions have caused significant challenges for all users of grain," Dinneen said. "We understand the hardships facing the agriculture industry this summer are serious. From extremely poor pasture conditions to heat stress on animals to reduced crop yield potential, this summer's circumstances have been difficult.
"However, waiving the RFS won't bring the type of relief the livestock groups are seeking, nor will it result in significantly lower feed prices. In fact, because ethanol plants also produce a high protein feed, limiting ethanol production will only further complicate drought-related feed issues and costs."
Dineen said that the marketplace is the most efficient mechanism to ration demand, not the government, and that is already happening, as ethanol plants respond to sharply higher corn prices by significantly reducing production.
The industry's consumption of corn last week was the lowest in over two years and down nearly 14 percent in the last six weeks, he added.