The Hagstrom Report

Agriculture News As It Happens


Poultry state governors seek RFS waiver

Four Democratic governors formally asked the Environmental Protection Agency Tuesday to waive the Renewable Fuel Standard because the drought has caused higher feed prices, but ethanol, corn and biotech groups urged the agency not to grant the waiver.

Gov. Beverly Perdue of North Carolina, Gov. Mike Beebe of Arkansas, Gov. Martin O’Malley of Maryland and Gov. Jack A. Markell of Delaware filed the petitions.

“It is now beyond dispute that our nation is undergoing a severe, prolonged drought that is of historic proportions and is causing widespread damage to many of the most productive agricultural regions in the country,” Perdue said in a news release sent out by the National Chicken Council.

The “direct harm,” she added, was “caused by the RFS requirement to utilize ever-increasing amounts of corn and soybeans for transportation fuel.”

“Whatever the final damage done by the severe lack of rainfall, it is clear that this harm is reflected in accelerated prices for corn and soybeans, which have a severe economic impact on the state of North Carolina, various regions within the state, and important economic sectors within the state,” she said.

“While the drought may have triggered the price spike in corn, an underlying cause is the federal policy mandating ever-increasing amounts of corn for fuel,” Beebe said in the same news release.

“The higher feed costs following the passage of RFS1 in 2005 and RFS2 in 2007 have resulted in a long-term shortage of grain in our nation, especially corn, and are clearly taking a terrible toll on Arkansas’ poultry and animal agriculture, potentially forcing reduced production and job losses and increasing food prices for consumers worldwide,” Beebe said. “I urge you to begin a formal process for considering a waiver of the renewable fuel mandate.”

Arkansas and North Carolina are the second and fourth largest broiler chicken producing states, respectively, the chicken council noted. For turkey production, North Carolina ranks second and Arkansas third nationally.

The National Chicken Council and National Turkey Federation supported the petitions.

“On behalf of North Carolina’s and Arkansas’ chicken farmers and processors, and the entire chicken industry, I thank Govs. Perdue and Beebe for their efforts in trying to bring some relief to poultry producers, consumers and the economic sectors that are struggling due to the drought, the high price of corn and continued corn-ethanol mandates,” said National Chicken Council President Mike Brown.

“I strongly urge EPA Administrator Jackson to immediately grant a full, one-year waiver for the corn-ethanol mandate.”

“As this drought continues to wreak havoc on our nation’s corn crops, we are grateful to Govs. Perdue and Beebe who are showing real leadership by asking for relief,” said Joel Brandenberger, president of National Turkey Federation.

“We need a waiver now, while EPA has the ability to make a difference in our members’ livelihoods and the nation’s economy. These governors are asking for the right thing at a time when it is critical, and we thank them,” Brandenberger said.

The poultry leaders noted that 156 House members and 26 senators have also called on EPA to issue the waiver.

Growth Energy CEO Tom Buis issued a news release again countering the call for an RFS waiver.

“The waiver request filed today by the governors of Arkansas and North Carolina, Maryland and Delaware is unnecessary and based on misinformation,” Buis said.

“First, the RFS contains plenty of flexibility to ensure that the volume goals can be met when shortages occur, such as this drought,” he said. “Hysteria and misinformation should not dictate policy directives.”

Buis continued, “The marketplace always has worked and always will work in rationing demand for commodities that are in short supply. Already, market forces have taken effect — the production of ethanol has declined by 15 percent and corn prices have already dropped 36 cents from last week.”

“Furthermore,," he continued, "the governors continue to use misinformation saying that corn ethanol uses 40 percent of the corn crop — we do not,” Buis said.

“In fact, only 16 percent of the corn acres harvested goes to ethanol production,” he said. “Just one-third of the kernel is used for ethanol, with all the protein, fiber and oil being returned to the food chain in the form of a high protein animal feed, which replaces corn and soybean meal and is less expensive. I have full faith that the Environmental Protection Agency’s review of this petition will conclude the facts — any economic harm that may result is due to the drought, not ethanol production.”

The National Corn Growers Association called for careful analysis of the situation.

“We are in the midst of a historic and devastating drought,” NCGA President Garry Niemeyer said in a statement. “Its impact will be felt well beyond the farm sector. We have great concern and empathy for not only our members who are suffering, but all who we supply. This includes the domestic livestock sector, our export customers, the domestic food industry and the ethanol industry. All are suffering because of the drought.”

“While we believe that it is still somewhat premature to consider a temporary, partial waiver to the RFS (as there will be much more accurate information available with September’s and October’s USDA crop reports), we do respect the right of those with standing to exercise the language contained in the RFS," Niemeyer said. "The waiver process language in the RFS calls for careful objective analysis of the economic impact of the RFS on the U.S. economy. We have faith in, and support, the process laid out in this language.”

“If indeed the analysis shows that the RFS is not causing severe economic harm, but instead ethanol production is responding to market forces rather than the RFS, then the request for a temporary partial waiver should be rejected,” he said.

“If however, the analysis clearly shows that the RFS is causing severe economic harm in light of the drought, then a temporary, partial waiver should be granted.”

The Biotechnology Industry Organization urged EPA officials to consider carefully the impact of their decision.

“The RFS is a complex policy, but it provides multiple options to the fuel distributors obligated to make alternatives to foreign oil available to U.S. consumers,” said Brent Erickson, executive vice president of BIO’s Industrial & Environmental Section.

“A change to the policy in any given year will impact the production and use of renewable fuels for multiple years, which can disrupt the progress that has been made in advanced biofuels,” Erickson said. “A closing of the market for alternative fuels will chill investments in advanced biofuels.

“While not the largest industry in any state, the advanced biofuel industry is creating jobs and new economic growth opportunities within North Carolina, Arkansas, Maryland, Delaware and nearly every other state,” he said. “The potential for additional job creation and rural economic development from advanced biofuel production remain strong, as long as the RFS remains stable.

“A waiver of the RFS is unlikely to provide relief from this year’s drought. But it could extend by several years the drought in investment capital for new technologies such as advanced biofuels.”