A.M.I.: Ethanol blends may boost commodity prices

by Bryan Salvage
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WASHINGTON — Livestock, poultry and food producers will face higher commodity costs if the Environmental Protection Agency grants a petition to allow a 50% increase in the allowable limits of ethanol in gasoline, according to two new studies released June 9 by Advanced Economic Solutions and FarmEcon LLC, the American Meat Institute relayed.

Both studies were completed on behalf of members of the Balanced Food and Fuel Campaign and were announced during a press teleconference.

Barring a change in government support for ethanol, if the E.P.A. allows blends of more than 10% ethanol, the Advanced Economic Solutions study projects that by 2015 up to 110 million acres of corn will be planted, constituting the highest number of acres planted since WWII and nearly a 20% increase over the baseline.

Titled "Implications for U.S. Corn Availability Under a Higher Blending Rate for Ethanol: How Much Corn will be Needed" and written by Advanced Economic Solutions president Bill Lapp, the study also examines the potential for a serious shortfall of availability in the corn market, particularly if the blend wall is raised.

In approximately one out of every four years, U.S. corn yields have been 7% or more below trend. A 7% yield loss would equate to more than 1 billion bushels, more than the projected carryout during 2010-2015 in the E10, E12 or E15 scenarios, Mr. Lapp said.

"Issues with an Ethanol Blend Rate Increase", the second study authored by Tom Elam, Ph.D., focuses on the effects that increasing the allowable ethanol blend levels in motor fuel will have on the price of corn fed to livestock and poultry. Since corn is the number-one input cost for the animal agriculture industry, the study shows the correlations in the cost of meat and poultry to consumers in the future.

U.S. biofuels policies and regulations contain inherent contradictions and have also resulted in significant economic damage to diverse sectors from inside and outside of the energy industry, according to Mr. Elam. Increasing the maximum blend of ethanol in gasoline, combined with higher 2010 Renewable Fuels Standard requirements, will increase cost pressures on both ethanol and food producers.

To view the Advanced Economic Solutions study by Bill Lapp, visit http://www.foodbeforefuel.org/files/LappE15June09.pdf

To view the FarmEcon LLC study by Thomas E. Elam, visit http://www.foodbeforefuel.org/files/Elam%20blend%20rate%20issues%20FINAL.pdf

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