Source:  Rita Jane Gabbett, MEATINGPLACE.COM, 1/21/11
 

The Environmental Protection Agency today waived a limitation on selling gasoline that contains more than 10 percent ethanol for model year 2001 through 2006 passenger vehicles, including cars, SUVs, and light pickup trucks.

Today’s action — which follows a similar waiver for model years 2007 and newer last October — paves the way for fuel that contains up to 15 percent ethanol (E15) to be used potentially by 62 percent of vehicles on the road today, according to car industry data.

The waiver is bound to spur demand for ethanol — not welcome news for meat and poultry producers who compete with ethanol makers for the corn.  

U.S. corn prices have already spiked to 30-month highs of over $6.00 per bushel this month on decreased supplies.

“As E15 is rolled out at fuel retailers, the ethanol market should expand which will help alleviate the ethanol blend wall,” wrote Stephens Inc. analyst Farha Aslam in a note to investors.

The “blend wall” refers to the fact that ethanol demand is currently maxed out at the 10 percent blend rate and production has hit a ceiling. The opportunity to produce E15 would expand the market for ethanol refineries.

The decision is not, however, a turnkey for E15 to show up at gas stations, which still must install E15 pumps and address labeling issues and concerns about fueling mistakes by ineligible vehicles.       
The EPA also announced that no waiver is being granted this year for E15 use in any motorcycles, heavy-duty vehicles, or non-road engines because current testing data does not support such a waiver.

Reaction
“E15 may be good for ethanol producers and corn farmers, but it is clearly detrimental to all other interested parties,” said Bill Roenigk, senior vice president and chief economist for the National Chicken Council. “To the extent EPA and the ethanol industry actually manage to force more ethanol into the nation’s motor gasoline; they will put even more pressure on the already very tight supply of corn. When consumers ask why their food costs are higher, it will be difficult for EPA to explain that today’s decision had no impact on the food shopper’s dollar.”

“This announcement only means that more corn will be diverted from an already thinning supply and increased pressure will be put on the meat and poultry sector which is already facing near record high feed costs…Burning our food and feed as fuel is not a sustainable approach to solving this country’s long-term energy needs,” said American Meat Institute President and CEO J. Patrick Boyle.

Secretary of Agriculture Tom Vilsack, however, called the move an important step in creating jobs in rural America, improving energy security and protecting the environment, adding, "Expanding the use of E15 in America's vehicle fleet gives consumers the option of purchasing domestically produced renewable transportation fuels and also support America's farmers and ranchers."

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