Use Costly Corn for Feed, Not Fuel, Texas Governor Urges

WASHINGTON, DC, June 25, 2008 (ENS) – Texas Governor Rick Perry is asking the federal government to reduce by half the amount of corn-based ethanol that must be blended into the national fuel supply under the national Renewable Fuel Standard, RFS. Instead of being used for fuel, the governor wants that corn to feed livestock and people.

On Tuesday, the governor held a news conference at the National Press Club in Washington to press his case, joined by food producers and retailers. The governor said his request for a waiver of the RFS is motivated by rising corn prices which have proved damaging to Texas’s enormous livestock and poultry industry.

“While I have no doubt this mandate was a well-intentioned effort to move our country toward energy independence, it is doing more harm than good and must be modified before our livestock industry suffers permanent damage,” said Governor Perry. “Granting this waiver will provide much needed relief to families, while enabling Texas to continue feeding and fueling the nation.”

On April 25, Governor Perry submitted a request to the U.S. Environmental Protection Agency to reduce the RFS mandate by half – from nine billion to 4.5 billion gallons blended into the national fuel supply.

The EPA opened the waiver request for a public comment period, which ended on Monday. Now the environmental agency has until July 24 to issue a decision.

This Texas fueling station sells fuel
that is 85 percent ethanol.
(Photo credit unknown)

In April 2007, the EPA established the nation’s first comprehensive Renewable Fuel Standard, which requires American refiners, blenders, and importers to use a minimum volume of renewable fuel each year between 2007 and 2012.

The minimum – determined as a percentage of the total volume of fuel a company produces or imports – will increase every year.

For 2007, 4.02 percent of all the fuel sold or dispensed to U.S. motorists had to come from renewable sources, roughly 4.7 billion gallons.

In 2008, the EPA raised the required ratio to 7.76 percent or nine billion gallons of renewable fuel.

But today, with corn prices hitting $8 per bushel and Midwest flooding devastating the corn crop, price increases for livestock and poultry feed are putting financial pressure on both producers and consumers of meat, milk and grain products.

Emphasizing the urgent nature of the waiver request given the recent flooding in the Midwest, J. Patrick Boyle, president and CEO of the American Meat Institute, said, “The prices for beef, pork and dairy products have risen dramatically over the past few months and this upward trend will continue, as the food used to feed these animals is washed away by flood waters and the projected size of the corn harvest shrinks.”

Bill Roenigk, senior vice president and chief economist of the National Chicken Council, which represents chicken production and processing companies, supports the governor’s request for a waiver.

“The Renewable Fuel Standard has distorted the market and has imposed severe economic harm on companies in our industry through dramatically higher input costs and is imposing harm on the general public in the form of higher prices for food products,” said Roenigk.

“Cattlemen are now confronting $7 and even $8 corn, and that may just be the beginning,” said Gregg Doud, chief economist for the National Cattlemen’s Beef Association. “Even before the wet spring pushed into June, we were already seeing a lot of acres migrating away from corn this year. By the time conditions improve in many of these fields, planting corn will no longer be an option.”

“Government support for corn-based ethanol ensures a permanent, significant and increasing demand for corn,” said Dr. Keith Collins, a former chief economist of the U.S. Department of Agriculture who submitted a new analysis of the situation to the EPA on Monday.

“These policies interfere with the normal price rationing function of markets when supplies are short such as in 2008, with production being reduced by flooding and excess moisture,” he said.

“In this short-crop environment, biofuels policy, including mandated use of ethanol, causes even higher corn prices, shifts the demand adjustment burden to non-ethanol users of corn – particularly the livestock sector – and puts continuing pressure on food prices.”

In a separate analysis, also offered on Monday, Dr. Thomas Elam of FarmEcon LLC, warns, “”Maintenance of the current RFS schedule in the face of a smaller 2008 corn crop will be devastating to meat, dairy and poultry producers.”

“Consumers will suffer as food and fuel costs rise and supplies of corn-based foods diminish,” he wrote. “The overall economy will be damaged from higher inflation and lost jobs in the food production sector.”

One after another food producers and distributors stood up to support Governor Perry’s request – the bakers, the turkey producers, the restauranteurs.

“We must ensure that we are not forcing our needs on food and fuel to compete against each other,” said John Gay, senior vice president of government affairs and public policy for the National Restaurant Association, which supports the development of renewable fuels, including the recycling of waste restaurant oil into biodiesel.

“Although there are many factors contributing to runaway food inflation, there is only one factor the administration can change – federal food-to-fuel mandates,” said Grocery Manufacturers Association President and CEO Cal Dooley.

“At a time when tens of thousands of Americans are turning to food banks to feed their children, no administration could reasonably conclude that ethanol refiners should be given priority over working families, food companies, and livestock farmers.”

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