The Renewable Fuel Standard Flexibility Act of 2011 proposed by two House of Representatives members last week has grabbed the attention of U.S. livestock and poultry producers at a time when the industries face record high feed costs. The National Pork Producers Council strongly supports the measure.
The legislation, sponsored by Reps. Bob Goodlatte, (R-Va.) and Jim Costa, (D-Calif.), provides an escape clause from mandated ethanol production levels, as set by the Renewable Fuel Standard, during times of low corn inventory levels.
The bill would give pork producers a safety valve by reducing the ethanol mandate by 25% when corn’s stocks-to-use ratio is projected to be between 5% and 5.99% and decreasing it by 50% when the ratio is below 5%.
The USDA projects 2011/2012 corn stocks-to-use ratio at 5.3%. The ratio is down from 6.9% for 2010/2011 and 13.1% for 2009/2010.
U.S. pork producers are cautiously optimistic that the bill will help alleviate the growing threat to profitability. “We’re hopeful that this legislation will be adequate to provide livestock producers with the necessary protection to ensure feed availability,” said Leon Sheets, president of Iowa Pork Producers Association, in a statement. “This bill appears to be a good starting point, or at least one component, of a comprehensive solution to the issue.”
“The Iowa Pork Producers Association has always supported ethanol and still does, but with the increased competition for corn and the dwindling feed stocks, pork producers have been expressing great concern about corn availability as a feed source,” according to the statement.
“Congressman Goodlatte’s bill seems to make sense and appears to be an equitable approach for everyone concerned,” added Sheets. “We need something in place that assures pork producers of having enough corn available to feed hogs.”
Under the terms of the legislation, corn’s present stocks-to-use ratio would have already triggered a reduction of ethanol production. “Had this law been in effect this year, the mandate for 2011 would have been reduced by 15% given last November’s ratio of 6.2% for the 2010-2011 crop year and then been reduced by 25% given USDA’s June ratio of 5.4%,” according to the CME Daily Livestock Report.
USDA’s September estimate for the 2011/2012 crop year stocks-to-use ratio was 5.3%. “Should that estimate hold into November and this law be passed, the 2012 RFS level would be 9.9 billion gallons instead of 13.2 billion gallons,” according to the CME report.
In recent congressional testimony, NPPC said U.S. biofuels policy should take into account weather-induced grain production shortfalls and address how the problems associated with a short crop can be shared equitably among all grain users. The organization also said the ethanol industry should bear some of the same risks that pork producers and other corn users bear from market supply and price shock.
The ethanol industry is expected to use nearly 40% of the 2011/2012 corn crop - the first time it will exceed the amount used by the livestock and poultry industries.
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Source: NPPC, Iowa Pork Producers Association, CME Daily Livestock Report