In response to requests for a full or partial waiver of the Renewable Fuels Standard (RFS) from eight governors, 156 U.S. House members, 34 senators, poultry and livestock producers and the United Nations, Bob Dinneen, president of the Renewable Fuels Association (RFA) says it is “unnecessary at this time.”
It seems Dinneen, on his own, knows better than the governors, lawmakers and thousands of livestock producers calling for what they believe is a chance for relief, however small, from record corn prices during the worst drought in a half century.
Undoubtedly, corn growers are a vital group of America’s farmers. However, livestock producers and poultry producers also are very important to the well-being of the country. One big difference however, is that corn growers have a guaranteed market for their product- the RFS.
Not so for livestock and poultry producers who struggle each day to raise and produce wholesome food as well as promote their products and find markets for them.
Three Purdue University economists recently said the effect on corn price from a partial or total waiver of the RFS depends on many conditions, including future oil prices and the length and severity of the drought. According to their report, “a waiver could, under certain conditions, reduce the demand for corn and, thus, corn prices for livestock producers and other non-ethanol corn buyers.”
Obviously, there is no guarantee for livestock producers and poultry producers that a waiver would lower the price of corn significantly. With the RFS mandate in place, the only thing that is guaranteed is the level of ethanol production- a guarantee enjoyed by the ethanol industry and corn growers.
Dinneen adds that the reason a waiver is unnecessary stems from “overcompliance with the program” by ethanol producers. This overcompliance enabled the ethanol industry to export 1.19 billion gallons of ethanol in 2011. (I doubt if the exports were mandated by the RFS.) With this overcompliance, the ethanol industry is saying that they will determine the level of ethanol production, not the Environmental Protection Agency’s (EPA) mandate.
Perhaps the governors, lawmakers and livestock producer groups requesting the waiver should add the request that the ethanol industry not exceed the mandated RFS production level set by EPA.
Chris Hurt, Purdue University agricultural economist, says the next 12 months will deal devastating financial consequences to the nation’s pork producers with losses that may average about $33 for each hog sold. “That means total losses of around $4 billion for the U.S. industry.”
A creative solution to this food or fuel dilemma is clearly needed that would balance the nation’s need for alternative fuels in a way that avoids unfairly burdening other corn customers. Levels of corn-based ethanol production should be based on expected carryover stocks, or expected harvest yield, rather than on some ideal scenario set years ago when drought was not a factor.
The EPA is expected to respond to the waiver requests in October. Hopefully, their announcement will encompass plans for increased production of cellulosic ethanol. The announcement should also include at least a partial waiver of corn-based ethanol production and rule that the reduced level will not be exceeded by the ethanol industry.