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Smithfield, Cargill CEOs take ethanol cause to the media
Story Date: 8/1/2012
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Source: Rita Jane Gabbett, MEATINGPLACE, 7/31/12
In a recent editorial in the Wall Street Journal, Smithfield CEO C. Larry Pope addressed the need for government action to reduce the amount of corn used to make ethanol in the face of the massive drought that is expected to dramatically reduce this year’s corn crop.
On Tuesday, Cargill CEO Gregory Page told CNBC the U.S. ethanol mandate should be adjusted so that a disproportionate burden of this year’s drought does not fall on the livestock industry and on consumers.
Under the Renewable Fuels Standard, 13.2 billion gallons of ethanol, mainly derived from corn, must be produced in 2012. It takes more than one-third of the U.S. corn crop even in normal years to produced that much ethanol.
“This is an arbitrary figure, set irrespective of market supplies, demands or price. It applies to corn that's desperately needed for livestock feed and food for consumers,” Pope wrote. “Ironically, if the ethanol mandate did not exist, even this year's drought-depleted corn crop would have been more than enough to meet the requirements for livestock feed and food production at decent prices.”
Although Cargill has extensive grain operations as well as meat plants, Page agreed.
"If all of that (demand rationing) is only on livestock or food consumers, it really makes the burden disproportionate. What we see are 3 or 4 percent declines in supply lead to 40 to 50 percent increases in prices, and I think the mandates are what drives that price elasticity which I think needs to be addressed," he said on CNBC.
Livestock and poultry groups on Monday held a news conference to announce they have petitioned EPA Administrator Lisa Jackson to waive “in whole or in substantial part” of the amount of renewable fuel that must be produced under the Renewable Fuels Standard (RFS) for the remainder of this year and for the portion of 2013 that is one year from the time the waiver becomes effective.
EPA denied a similar petition by Texas Gov. Rick Perry in 2008.
Another view
The Nebraska Corn Board, however, took great exception to Pope’s remarks.
“What an incredibly ignorant or disgustingly flippant perspective,” they wrote in a statement released on Monday. “Predictably especially since he said the same thing when corn was $4.00 Pope wants the Renewable Fuels Standard (RFS) and the ethanol to go away so he can make more money off drought stricken farmers,” the group charged.
The group went on to say that talk of repealing the RFS seems misguided.
“What many fail to understand is that in addition to a waiver request, which requires affected parties to show significant economic harm, fuel suppliers/blenders can build up Renewable Identification Numbers or RINs.
“Fuel blenders get RINs when they use more renewable fuels than required and estimates are that there is a surplus 2.5 billion RINs available right now . And if fuel blenders need more, they can carry a deficit of RINs into the next year. This by itself may already reduce ethanol production and the corresponding corn demand over the next year.
“There's also a surplus of ethanol already in storage and several ethanol plants, including from some of the biggest companies in ethanol, have already idled plants. Many other plants are running at reduced capacity and losing money on every gallon they produce.”
For more stories, go to http://www.meatingplace.com/.
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