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Livestock, poultry groups release ethanol study
Story Date: 7/20/2012
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Source: Dani Friedland, MEATINGPLACE, 7/19/12
A coalition of livestock and poultry groups is urging Congress to change the Renewable Fuels Standard.
The moves comes after a study, conducted by Thomas Elam of FarmEcon LLC and funded by livestock and poultry groups, asserted that the federal ethanol policy has increased and destabilized the prices of corn, soybeans and wheat.
“The increases we’ve seen in commodity prices are strongly associated with the RFS mandate,” Elam said in a National Pork Producers Council news release. “At the same time, we haven’t seen the promised benefits on oil imports or gasoline prices. This means that while Americans are forced to pay more for food, they’re also not seeing lower prices at the pump; it’s a lose-lose situation.”
Elam notes that the biofuels industry does not yet have a commercially viable process for converting cellulosic biomass to ethanol, and that increased ethanol production since 2007 has not reduced gasoline production or crude oil use.
The American Meat Institute, the National Cattlemen’s Beef Association, the National Chicken Council, the National Pork Producers Council, the National Turkey Federation, California Dairy Inc. and the Milk Producers Cooperative funded the study.
The Renewable Fuels Standard (RFS) mandates that 15.2 billion gallons of ethanol be produced this year.
Elam’s findings include:
Ethanol, because its energy cost is higher than gasoline and because of its negative effect on fuel mileage, added about $14.5 billion, or 10 cents a gallon, to motorists’ fuel costs in 2011.Increased ethanol production since 2007 has had no effect on gasoline production or oil imports, contrary to supporters’ claims.Corn used for ethanol production rose 300 percent from 2005 to 2011, increasing from 1.6 billion bushels to 5 billion.
(Ethanol production now uses more than 40 percent of the U.S. annual corn supply.)Corn now represents about 80 percent of the cost of producing ethanol compared with 40-50 percent before implementation of the mandate.
Corn prices jumped to more than $6 a bushel in 2011 from $2 in 2005.The rate of change for the Consumer Price Index for meats, poultry, fish and eggs increased by 79 percent while it decreased by 41 percent for non-food items since the RFS was revised in 2007.Ethanol production costs and ethanol prices have all but eliminated a market for ethanol blends higher than 10 percent.
The United States exported 1.2 billion gallons of ethanol in 2011.
“The RFS should be reformed to allow for automatic adjustments to the RFS to reduce incentives for ethanol production in years when corn stocks are forecast to reach critically low levels,” Elam writes in the study.
The study coincides with a few congressional moves to examine ethanol. A Senate Biofuels Investment and Renewable Fuels Standard Market Congressional Study Group is looking into several aspects of the RFS, and Reps. Bob Goodlatte (R-Va.) and Jim Costa (D-Calif.) sponsored legislation last October that would require a biannual review of corn stocks in relation to their total use that could cut the ethanol mandate proportionally. The bill is called the Renewable Fuels Standard Flexibility Act, H.R. 3097; click here for more information about it. :
In advance of the study’s release, the Renewable Fuels Association sent a note to reporters reiterating its position that “there is no justification for such a waiver and the EPA can't just arbitrarily decide to waive the program based on speculation about the impacts of the current drought.”
The full study is available for download here.
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