National Pork Producers Council Vice President Randy Spronk believes lawmakers should consider policies that require users of corn for ethanol to bear some of the same risks from corn market supply and price shocks that pork producers and others do. Spronk, a pork producer from Edgerton, Minn., testified recently before the House Subcommittee on Livestock, Dairy, and Poultry on the effects of tight supplies and high prices of feed grains.
Since ethanol production and use are mandated by the federal government, production levels are not materially altered by fluctuations in corn price. In addition, the Volumetric Ethanol Excise Tax Credit pays ethanol blenders 45 cents for every gallon of ethanol as a subsidy for the industry. “The ethanol industry’s growth has been driven almost entirely by the federal Renewable Fuels Standard mandate, which makes no provision for short corn supplies,” Spronk said.
Much of the current demand for corn is coming from the ethanol industry, he testified, which this year is expected to overtake livestock and poultry producers as the largest user of U.S. corn.
Spronk told members of the panel that over the past year a combination of bad weather and bad policy has created a situation today where pork producers are questioning whether there will be an adequate supply of animal feed. Spronk pointed out that the U.S. Department of Agriculture dropped its current-year corn yield estimate to 148.1 bushels an acre, down from 153.0 bushels.
The pork industry is not the only group feeling the pressure from uncertainty in the availability of animal feed. “Representatives from several other livestock organizations are calling for flexibility in the Renewable Fuels Standard mandates,” says Rich Pottorff, Doane Agriculture Services analyst. “They would like to see the law changed to allow for mandates to be reduced when the corn stocks-to-use ratio gets very low.”
Spronk urged lawmakers to consider policies that will address looming feed grain supply challenges, including:
- Adopt measures to assist livestock and poultry producers who suffer losses because of corn rationing. Even with policy changes designed to deal with the inflexibility in ethanol’s demand for corn – i.e., the mandate – other corn users will still bear a disproportionate share of the supply risks associated with weather and other factors.
- Adopt policies that would fairly and smoothly transition the U.S. ethanol industry to full reliance on the private market for its supply signals and away from the signals provided by the government through the RFS and subsidies.
Source: NPPC, Doane