Citing high prices resulting from a historic drought and heat wave which threatens to decimate this year’s corn crop in the Midwest, North Carolina Governor Beverly Perdue has joined with Arkansas Governor Mike Beebe to call for a federal suspension of the ongoing Renewable Fuels Standard mandate for corn-based ethanol production.
Corn prices recently topped an all-time high at $8.28 per bushel and some agriculture economists contend prices may reach $10 a bushel and stay in that range for some time.
Much of the Midwest corn crop produced without irrigation is a total loss.
Though irrigated crops are likely to produce an average crop, there is mounting concern over the safety of feeding grain exposed to heat and drought to livestock.
The overall agreement is that corn for feed will be in short supply and perhaps simply not available to livestock producers at its current price.
In her Aug. 14 petition to the federal government, Governor Perdue contends, “The government mandate requiring a certain volume of ethanol production is causing "direct harm" to the livestock industry, increasing the cost of producing food and depleting already severely stressed grain supplies."
The EPA-enforced Renewable Fuel Standard requires about 15 billion gallons of ethanol, most of which is derived from corn, to be blended into gasoline this year. Prior to this year’s severe drought, the USDA estimated that as much as 40 percent of this year’s projected 92 million acre corn crop would go into ethanol production this year.
The efforts of the North Carolina and Arkansas Governors follow similar, though less publicized appeals Governor Martin O’Malley from Maryland and Governor Jack Markell of Delaware, sent to EPA officials. Both Maryland and Delaware are among the nation’s leaders in poultry production.
In their Aug. 9, letter to the EPA, the governors stated, “Given the likely impacts to the poultry industry, not to mention the increased cost of food for consumers, of this dramatic increase in price due to the under-supply of corn, it is hard to imagine any scenario when exercising your authority would be more appropriate.”
The ethanol industry was quick to counter the requests of Governors Perdue and Beebe. In a sharply worded plea to federal authorities, the RFA (Renewable Fuels Association) said, “The Environmental Protection Agency should reject Governor Perdue’s waiver request out of hand. While this drought has caused stress in many agricultural communities, it has not caused the kind of widespread economic harm that is the threshold for EPA to act.
Includes a number of options
“The RFS (Renewable Fuels Standard) already includes a number of compliance options allowing great flexibility for oil refiners to meet their obligations under the program. The market is already taking advantage of these flexibilities as ethanol production has slowed 15 percent since the beginning of the year in response to market signals,” the response continued.
The RFA contends a waiver of the RFS will not provide the relief meat and livestock producers seek nor will it make it rain on dry corn fields and pastures.
What waiving the RFS would do is send chilling signals to investors in new biofuel technologies, threaten to force gas prices higher than they already are, and dramatically lower the availability of ethanol feed products on which the livestock industry is going to rely.
“We look forward to once again demonstrating that the efforts of those in the livestock, meat, food processing, and petroleum industries to end domestic ethanol production would do more harm than good to America’s economy and its energy security than a return to $2 per bushel corn prices and an increasing reliance on imported oil,” says Matt Hartwig, communications manager for the RFA.
The American Corn Producers weighed into the fray with an update or a recently commissioned study by the U.S. Grain Council.
The National Corn Growers Association is a founding member of the U.S. Grain Council, which released an in-depth analysis of recent U.S. Department of Agriculture reports which revised corn production and market forecasts
The Council report acknowledges that in its monthly agricultural supply/demand update the U.S. Department of Agriculture on Aug. 10 again lowered the outlook for U.S. corn production, reflecting the continued deterioration of this year's crop due to the once-in-a-lifetime drought that affects most of the U.S. Corn Belt.
The latest USDA projection lowers both world and U.S. corn production forecasts to levels below those achieved in 2011/2012, but notes world production estimates remain higher than 2010/2011 due to higher production from China, Brazil and Argentina.
The report projects a drop in worldwide corn use of more than 275 million bushels. The largest declines, according to the report and analysis, will be seen in feed use, corn use for ethanol and in U.S. corn.
“Globally, all corn users will face the challenge of higher prices and the need for increased efficiency, careful risk management and creative marketing strategies during the coming year. As the projections for U.S. corn use demonstrate, the high prices will ration demand in all markets and in all sectors,” the report states.
North Carolina and Arkansas are both among the top five producers of broilers and turkeys. Despite a sharp rise in grain production in the past few years, North Carolina remains in a severe grain deficit situation, causing significant reductions in both poultry and swine flocks and herds.
The North Carolina Poultry Association has joined the National Chicken Council in asking for support of the petition from the two Southern governors.
“On behalf of North Carolina’s and Arkansas’s chicken farmers and processors, and the entire chicken industry, I thank Governors Perdue and Beebe for their efforts in trying to bring some relief to poultry producers, consumers and the economic sectors that are struggling due to the drought, the high price of corn and continued corn-ethanol mandates,” says National Chicken Council President Mike Brown.
“I strongly urge EPA Administrator Jackson to immediately grant a full, one-year waiver for the corn-ethanol mandate,” Brown says.
(For much more information on the ongoing debate over the RFS, click here).