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October 23, 2012
Food producers want 2013 ethanol waiver

               The EPA is currently considering the merits of a petition from several state governors requesting that the renewable fuel standard (RFS) for corn-based ethanol, which must be met by gasoline refiners, be waived while the agricultural sectors in those states recover from this year’s drought.  Several major livestock organizations have now come forth with comments in support of the waiver petition.  One comment from the National Chicken Council (NCC) states that the EPA should waive 100 percent of the corn-based ethanol standard for 2013.  Lacking the waiver, severe economic harm caused by increased corn, feed, and food prices will result, says the NCC.

               The RFS requires that 13.2 billion gallons of ethanol be blended into the fuel supply in 2012; that requirement is scheduled to increase to 13.8 billion gallons for 2013.  According to the NCC, for the 2010/2011 harvest, ethanol production consumed 40 percent of the nation’s corn crop, and next year’s RFS requirement will consume an even greater percentage.             

Lower corn production

               The NCC notes that in June 2012, the Department of Agriculture (USDA) estimated a 2012 harvest of 14.79 billion bushels of corn.  That projection dropped to 10.73 billion bushels in USDA’s most recent September 2012 estimates.  Also, more than 50 percent of this year’s crop was rated as poor or very poor, says the NCC.  The 2012 harvest would mark the lowest production since 2006 and a 13 percent decrease from 2011.   Despite 13 percent less corn than last year (and more than 27 percent less than expected), the RFS mandate for 2013 would require that 5 percent more corn be diverted to ethanol production.

               Reserving more than 40 percent of the corn crop for ethanol production in the face of significantly reduced yields will inevitably increase the cost of food, especially the cost of poultry and livestock, states the NCC.  Also, approximately 75 percent of foods on grocery store shelves contain corn, corn by-products, or corn-processed foods.  Absent a waiver, the RFS will likely raise corn prices by more than $2. per bushel, at least 24 percent, says the NCC.  This will result in an overall increase in food prices by over 2 percent, “solely because of the RFS,” states the NCC.

               The NCC adds that corn-based ethanol serves as an oxygenate in fuel and as a means of increasing the octane of gasoline.  But ethanol is a poor source of energy, with 1 gallon of ethanol providing only 67 percent as much energy as a gallon of 87 octane gasoline, notes the NCC.

Texas petition

In its letter to the EPA, the NCC notes that in 2008, the Agency turned down a request from Texas to issue a 50 percent waiver of the corn-based ethanol RFS.  At that time, the Agency estimated that the waiver would reduce the price of a bushel of corn by $.30, and severe economic harm to the economy of Texas–one condition for granting a waiver–would not result. 

“The economic harm corn users now face due to the RFS is more than six times as severe as that faced in 2008,” states the NCC, “and a waiver is vital to preventing severe harm to the nation’s economy.” 

The NCC also points to several studies that argue that the RFS does not meaningfully reduce prices at the gas pump.  “An oft-touted study” concluding that ethanol, despite making up only 6.7 percent of the energy content of gasoline sold in the United States, reduced average gas prices by $1.09 has been “thoroughly debunked as methodologically unsound,” claims the NCC.

“Indeed, more recent analyses have found that ethanol use may even increase fuel costs by $0.10 per gallon, or $14.5 billion annually, and that increased ethanol production has had no statistically significant effect on gasoline prices or refiner margins,” says the NCC.

“Given the conditions of the country’s corn supply—and its critical importance to feeding the nation—it is irresponsible to divert more than 40 percent of it to use as a second-rate motor fuel,” concludes the NCC.  “The RFS should be waived in full to remedy this harm.”

Click here to read NCC’s comment letter to the EPA.

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