Industry trade groups against higher ethanol blends
July 21, 2009
by Bryan Salvage
WASHINGTON — Meat and poultry trade groups urged the Environmental Protection Agency not to accept an ethanol group’s petition to allow blends of more than 10% ethanol in gasoline because the higher blend could divert nearly half of the U.S. corn crop from food and feed to fuel production. Prematurely allowing blends of E12 or E15 will create incentives for gasoline refiners to eventually use as much as 22 billion gallons of corn ethanol, the American Meat Institute and National Turkey Federation claimed.
Such a change will have direct impacts on the ability of livestock and poultry producers to effectively predict future annual budgets and costs due to volatility in the markets as feed is the largest input cost associated with raising food producing animals, they added.
"While the RFS and blend rates may mandate ethanol production, they cannot mandate corn plantings, production or the prices," the groups stated. "Nor can mandates create more total land for farm use. Since 2005, corn prices have increased significantly and price volatility has quadrupled, largely as a result of increased corn demand for ethanol production and limited land available for corn plantings."
Their comments were filed as a response to a petition submitted earlier this year by Growth Energy, asking E.P.A. to increase the allowable ethanol blend to 15%.
The cost of the 2008 crop corn, largely as a result of increased ethanol use, was increased by $2.10 per bushel over the 2005 crop. Based on 12 billion bushels of total use that represents a $25.2 billion annual cost increase for corn’s food, feed, ethanol and export users. Higher corn prices have also had the effect of causing higher prices for soybeans, wheat, rice and other crops. Cost of production and prices of ethanol are also increased.
FarmEcon LLC estimates 2009 U.S. meat and poultry products will decline a record 3 billion lbs. from 2008. Approximately $7.8 billion in retail meat and poultry sales will be lost to the economy.
The comments pointed out that any economic value added by additional ethanol production is being more than destroyed by higher costs, lost sales and increased business risks elsewhere in the economy. Lower production of other items that depend on grains has resulted. Forced ethanol production is a net economic drag on the economy, and as such expansion should be discouraged, the groups said.
Their comments also recommended the following actions to protect food and fuel consumers:
- D.O.E. and E.P.A. should complete assessment impacts of higher blends and certify that for all gasoline engines there are no manufacturer warranties, performance, safety or environmental concerns.
- D.O.E. and U.S.D.A. should complete a comprehensive review, including the use of impartial third-party experts, on the effects of conventional ethanol production on meat, dairy and poultry production, food production costs and retail food prices.
- D.O.E. and U.S.D.A. should work with Congress to address a comprehensive structure that supports the U.S. ethanol industry and work to find sensible solutions for all feed grain users.