The Hagstrom Report

Agriculture News As It Happens


Coalition calls for Renewable Fuels Standard change; ethanol groups fight back hard

A coalition of meat and dairy groups that use corn for feed today called on Congress to change the Renewable Fuels Standard, but the Obama administration and Senate Agriculture Committee Chairman Debbie Stabenow, D-Mich., and corn and ethanol groups are fighting hard against the idea.

The American Meat Institute, California Dairy Inc., the Milk Producers Cooperative, the National Cattlemen’s Beef Association, the National Chicken Council, the National Pork Producers Council and the National Turkey Federation released a study they had commissioned by Thomas Elam of FarmEcon LLC, an Indiana-based agricultural economist.

Rep. Bob Goodlatte, R-Va., the vice-chairman of the House Agriculture Committee, co-author with Rep. Jim Costa, D-Calif., of legislation that would alter the RFS and host of a news conference with the groups, said that as the drought creates concern about the corn supply it is time “to reduce the RFS mandate for this year.”

The RFS requires that 15.2 billion gallons of ethanol be produced and blended into gasoline. Goodlatte and Costa’s legislation would require a biannual review of ending corn stocks relative to their total use. If the ratio falls below 10 percent, the RFS could be reduced by 10 percent. If it falls below 7.5 percent, the mandate could shrink by 15 percent; below 6 percent, it could be reduced by 25 percent; and if the ratio falls below 5 percent, the ethanol mandate could be cut by 50 percent.

“Corn users other than the ethanol industry need assurance of automatic market access in the event of a natural disaster and a sharp reduction in corn production – a fact that is right around the corner,” the groups said in a media advisory.

Thomas Elam
Thomas Elam
But the Elam study stressed the long-term effects of the RFS.

“The increases we’ve seen in commodity prices are strongly associated with the RFS mandate,” said Elam. “At the same time, we haven’t seen the promised benefits on oil imports or gasoline prices. This means that while Americans are forced to pay more for food, they’re also not seeing lower prices at the pump; it’s a lose-lose situation.”

ActionAid USA, a group concerned with food availability and development in Third World countries, also said today “any artificial government mandates for corn ethanol” should be removed because “diverting food to fuel through the renewable fuel standard can be dangerous for global food prices.”

The Environmental Protection Agency has the power to waive the mandate, but the agency seems unlikely to do that under the Obama administration, which has emphasized the development of alternative energy.

“There’s no need to go to the EPA at this point in time,” Agriculture Secretary Tom Vilsack told reporters Wednesday at a White House news conference on the drought. “Based on the quantity of ethanol that’s currently in storage, there’s no problem in that area at this point in time.”

Senate Agriculture Committee Chairman Debbie Stabenow, D-Mich., said Wednesday that there aren't enough votes in the Senate to repeal the RFS, DTN, the Omaha-based news service reported. Stabenow also told DTN she doesn’t think the EPA would grant a waiver of the RFS. “I don’t see them doing that.”

Ethanol groups fought back hard today in reaction to the groups, which have raised the issue before.

Tom Buis

Tom Buis
“What these groups are conveniently ignoring is that in 2011 ethanol production used only 3 percent of the global grain supply,” said Tom Buis, CEO of Growth Energy, which represents ethanol plant builders and operators.

“While farmers across the country are dealing with a severe drought, the livestock lobby is spreading misinformation and taking advantage of this crisis by playing on people’s fears during a time of economic turmoil,” Buis said.

“This is nothing more than an orchestrated attempt to place blame on American ethanol producers for rising food prices. Time and again, studies have shown that ethanol production has a minimal impact on the cost of food, but it seems they believe that if they spread the same misinformation over and over again, it will magically become true.”

The Renewable Fuels Association noted that an Elam study was part of the basis for the waiver request that Gov. Rick Perry, R-Texas, filed with EPA in 2008 and that EPA rejected.

“No evidence exists to support a reduction in the renewable fuel requirements of the RFS,” the RFA said. “Strong supplies of ethanol in storage, an oversupply of 2.5 billion Renewable Identification Numbers (RINs), and a smaller gasoline market that reduces the actual 2012 RFS requirement to just approximately 13.04 billion gallons are all indicators that the RFS will work in 2012 and 2013.”

The concern over corn prices has not stopped RFA from promoting E15, a fuel that contains a higher percentage of ethanol than the usual 10 percent blend. RFS noted in a news release this week that on July 10 Zarco 66 “Oasis” station in Lawrence, Kan., became the first retail gas station to offer E15 ethanol fuel.

Although some groups have expressed fears that E15 will cause engine failure and other problems, RFA noted EPA has said that the blend is safe and effective for light-duty vehicles built since 2001. That represents approximately 60 percent of the nation’s car fleet and is growing, RFA said.