Corn and ethanol industries dismiss livestock sector bid for RFS waiver
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WASHINGTON, August 2, 2012 -With drought conditions burning up pastures and limiting availability of affordable feedstocks, many livestock and poultry farmers are scrambling to figure out how to stay in business. In some cases, they are already liquidating herds.
“I think we could lose up to a third of our dairy cow numbers," says Missouri Dairy Association (MDA) President Larry Purdom. “These cows were sold for beef and will not be going back into the milking herd. This means less home-grown milk for Missouri which is already a milk deficit state. Our dairy farmers produce only about half of what Missouri's consumers need for all uses.
Many of these same livestock producers view ethanol requirements under the Renewable Fuel Standard (RFS) as part of their high-cost feed problem. So it came as no surprise that a coalition of cattle, hog and poultry producers filed a petition with the Environmental Protection Agency (EPA) Monday, seeking a full or partial waiver of the RFS ethanol requirement for up to one year.
In a media conference call Monday, representatives of the National Cattlemen's Beef Association (NCBA) and the National Pork Producers Council (NPPC), among other livestock organizations, said that with drought conditions expected to become the worst in 50 years and corn yields projected to drop significantly, “relief from the RFS is extremely urgent.”
In the its petition, the coalition asked for a waiver “in whole or in substantial part” of the amount of renewable fuel that must be produced under the Renewable Fuels Standard (RFS) for the remainder of this year and for the portion of 2013 that is one year from the time the waiver becomes effective.
The RFS requires 13.2 billion gallons of corn-based ethanol to be produced in 2012 and 13.8 billion gallons in 2013, amounts that the livestock groups say will use about 4.7 billion and 4.9 billion bushels of corn, respectively.
USDA reported Monday that in the nation's 18 highest corn-producing states, 48% of the crop is rated “poor” or “very poor,” which is similar to last week's report at 45% but drastically higher than the 14% found in those categories this time last year.
Yet, corn and ethanol advocates say it's still too early for federal officials to be considering a waiver to ethanol requirements under the RFS.
The National Corn Growers Association (NCGA) says it stands firm in its support of the RFS and said in a statement that “it is premature for a waiver of the RFS provisions at this point. With the crop still in the field, it is too early to determine this year's final corn supply. In addition, the ethanol industry now has a significant surplus of ethanol and RFS credits that can greatly offset ethanol's impact on the corn supply.”
The Renewable Fuels Association, a principal ethanol trade group, dismissed the livestock industry petition.
“Given the flexibilities inherent to the RFS, and the fact that waiving the program would not result in any meaningful impacts on corn prices, we fully expect (EPA) Administrator (Lisa) Jackson to deny any waiver request,” said Bob Dinneen, RFA president and CEO.
He said a “dispassionate review” would show an RFS waiver “would simply reward oil companies that have long sought to repeal this very important and successful program.”
Dinneen said ethanol production is already down and noted that any waiver would not only unfairly reduce ethanol production, but also reduce the market supply of distillers dried grains, a livestock feed option, and further complicate “drought related feed issues and costs.”
Tom Buis, CEO of Growth Energy, an ethanol manufacturing trade group, said “higher corn prices facing livestock and poultry users is a result of Mother Nature, not ethanol. To try and blame the ethanol industry is disingenuous and absurd. We have never run out of corn and this year will be no different.”
He said that while this year's crop yield will be reduced, “it is premature and irresponsible to blame ethanol for a lack of rain. These groups are playing on people's fears during a time of economic difficulty and a national crisis.”
Buis said the market has already shown it will adjust.
“Already we have seen a decrease in ethanol production, and with nearly a billion gallons of surplus ethanol, combined with approximately 3 billion [biofuel credits] available, obligated parties will be able to meet the volume requirements of the RFS,” he said.
The ethanol industry often cites a recent analysis by the Center for Agricultural Research and Development at Iowa State University that suggests a full waiver of the RFS during the upcoming 2012/13 corn marketing year would result in a nominal reduction in the price of corn, estimated by the analysis at less than 5%.
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