NCBA: 'Tie ethanol mandate to corn supplies'
Oct. 5, 2011
by Meat&Poultry Staff
WASHINGTON – Led by US Representatives Bob Goodlatte (R-Va.) and Jim Costa (D-Calif.), a bipartisan coalition of members of Congress heeded concerns of livestock producers that current US renewable fuels policies are artificially manipulating corn prices and putting a strain on corn supplies. On Oct. 5, the lawmakers introduced the Renewable Fuels Standard (RFS) Flexibility Act of 2011, which will tie the amount of corn ethanol production required under the RFS to US corn supplies.
“The federal government’s creation of an artificial market for the ethanol industry has created a domino effect that is hurting consumers. It is expected that this year about 40 percent of the US corn crop will be used for ethanol production,” wrote Reps. Goodlatte and Costa in a letter to their colleagues in the US House of Representatives. “Our legislation will alter the RFS to give relief to our livestock and food producers and consumers of these products. This is a common sense solution to make sure that we have enough corn supplies to meet all of our demands.”
Since 2004, the last year before the RFS was implemented, corn used for ethanol production increased from nearly 1.4 billion bushels to an estimated 5 billion bushels in 2010-2011, a 382 percent increase, said Steve Meyer, Ph.D., president of Paragon Economics, a livestock and grain marketing and economic advisory company in Adel, Iowa, on behalf of the National Cattlemen’s Beef Association, during a recent hearing of the House Subcommittee on Livestock, Dairy and Poultry. However, corn production has only increased by 5.4 percent over that same time period, he noted.
These differing growth rates and subsequent unprecedented low carryover stocks were primarily caused by ethanol subsidies and guaranteed market, Meyer said in his opinion.
The legislation will set up a process to require the administrator of the Environmental Protection Agency to review twice yearly the US Department of Agriculture’s report on the current crop year’s ratio of US corn stocks-to-use in making a determination on the RFS. In years with tight stocks-to-use ratios, a reduction to the RFS could be made.
Kevin Kester, president of the California Cattlemen’s Association, an NCBA affiliate, said this legislation will provide relief from tight corn supplies. He added it is important to note that had the RFS been in place since 1969, according to an analysis by Paragon Economics, a reduction in the RFS would have only been triggered five times.
“Cattlemen are not opposed to ethanol and we’re not looking for cheap corn. We simply want the federal government to get out of the marketplace and allow the market to work,” Kester said. “USDA has projected this year’s corn crop will be more than 400 million bushels smaller than last year. Supplies are already tight due to drought, floods and rising demand, driven partially by the mandate. A smaller corn crop will put even further strain on corn stocks.”