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Drought, prices drive new call for lowering corn RFS
By STEVE BINDER
Illinois Correspondent

WASHINGTON, D.C. — Record corn prices have lead to a new call for a reduced or eliminated federal mandate on the use of ethanol in the nation’s gas supply. The call is led by the nation’s largest livestock groups including the National Pork Produ-cers Council, the National Cattlemen’s Beef Assoc., the American Meat Institute, the National Chicken Council and the National Turkey Federation.
U.S. Rep. Bob Goodlatte (R-Va.) vice chair of the House Agriculture Committee, said last week he has introduced legislation to eliminate the Renewable Fuels Standard (RFS), which mandates that 10 percent of the nation’s gasoline supplies come from non-petroleum biofuel.

Goodlatte noted more than 40 percent of the United States’ corn crop now goes toward ethanol production, and he called the mandate a “broken RFS policy.”

First passed in 2005 and updated in 2007, the RFS’ intent was to lessen America’s dependence on foreign oil. This year, the RFS requires that about 15.2 billion gallons of ethanol be produced.
Goodlatte, a longtime advocate of lowering the RFS, held up a recent study by economist Thomas Elam as evidence that a government-created market for ethanol has led to higher grain prices in recent years. “The increases we’ve seen in commodity prices are strongly associated with the RFS mandate,” Elam said. “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.”

Cellulosic and biomass fuels still are in early development stages, so corn-based ethanol continues to be the No. 1 biofuel. As prices for corn continue to climb, so will the pressure to change the RFS, but so far the White House and leaders in the Senate say no changes are necessary.

Secretary of Agriculture Tom Vilsack said he met with President Barack Obama last week and said they don’t believe a lowering of the RFS is needed.

The livestock groups said consumers will pay a hefty price with higher food and gas prices in the months ahead. “Another short corn crop would be extremely devastating to the animal agriculture industry, food makers and foodservice providers, as well as to consumers,” they agreed.

Corn growers and ethanol producers say no change is needed to the RFS, and that it has helped reduce the country’s dependence on foreign oil, created jobs and helped keep gas prices from escalating.

“Both USDA Secretary Vilsack and U.S. Sen. (Debbie, D-Mich.) Stabenow, chair of the Senate Agriculture Committee, have indicated the drought is not an excuse to waive or repeal the RFS,” said Brian Jennings, executive vice president of the American Council for Ethanol.

Garry Niemeyer, an Illinois farmer and president of the National Corn Growers Assoc., said the RFS is doing what it was designed to do. “Now is not the time for changes. It’s working,” he said. “We won’t know the actual size of the 2012 corn crop until months from now. In the meantime, the market is working.

“All corn users are responding to market signals. Ethanol production and exports are down. In addition, there is currently an ethanol surplus in the United States that will further reduce demand on the 2012 corn crop.”

The USDA originally estimated corn yields this year at 166 bushels per acre, but downgraded that to 146 two weeks ago. National forecasts call for a continued drought in the Midwest through September, so that yield total will likely drop, said Emerson Nafziger, a crop sciences professor at the University of Illinois.
Among the conclusions in Elam’s study, the author said the ethanol mandate added about 10 cents to the price of a gallon of gas in 2011. The full study is online at www.nationalchickencouncil.org
7/25/2012