The Environmental Protection Agency issued its decision on raising the amount of ethanol allowed in gasoline from the current 10 percent to 15 percent.
EPA has approved the use of gasoline with 15 percent ethanol (E15) for new vehicles built in model year 2007 and after. However the agency rejected the request to raise the ethanol content for vehicles manufactured before 2001 and for off-road machinery. The agency is expected to delay a decision on cars for model years 2001-2006 until later this year.
The move is not expected to have an immediate impact on already rapidly rising corn prices. “With ethanol selling for very near the price of gasoline at present and containing only two-thirds the energy of gasoline, it is doubtful that many (or perhaps any) blenders will move to the 15 percent rate any time soon,” say Steve Meyer and Len Steiner, authors of the CME Daily Livestock Report. “While the change will not likely result in any immediate increase in ethanol usage or production and will thus not increase corn usage for ethanol production soon, it does promise an expanded market for ethanol producers who have been caught between the rising RFS requirements and the 10 percent allowable blend rate.”
Randy Spronk, the National Pork Producers Council’s environment committee chairman and a hog and crop farmer from Edgerton, Minn., emphasizes that effect of E15 on America’s pork producers could be dramatic.
“NPPC is withholding comment on raising the blend rate to E15 from its current E10 until we can consult with our economists. But any upward pressure on corn prices will have a negative effect on producers,” Spronk says. “Given that USDA’s Oct. 8 crop report revised down the expected yield and ending stocks of corn, we’re already seeing corn prices and the cost of raising a hog heading up.”
NPPC notes that the run up in corn prices has dropped projected pork profits for 2011 to $1.19 per head on average. That’s down more than $5 per head from a week ago, according to economist Steve Meyer, president of Paragon Economics.
“We don’t want a repeat of a couple of years ago when, due mostly to high feed-grain prices, pork producers lost an average of nearly $24 a hog from October 2007 through March 2010, and the industry lost nearly $6 billion. Family hog farms went out of business during that time, and many producers reduced their herd size,” Spronk says.
An unusual coalition composed of oil industry groups, environmentalists, food manufacturers and others has lobbied EPA to delay its decision based on concerns about safety, the environmental effects of boosted ethanol production, and fears of rising food costs.
The ethanol industry and its backers, meanwhile, are expected to applaud EPA’s decision on new vehicles, but will likely prod the agency to allow its use in older vehicles.