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Lawmakers request RFS drawdown

08/02/2012 @ 1:39pm

More than a hundred House Republicans and Democrats are calling on the federal government to reduce its production mandate for corn-based ethanol in an effort to bring down prices for the grain that have become much more expensive for livestock producers during the drought that grips much of the country.

As a result of the drought, "corn prices have risen dramatically over the past few weeks and are likely to remain at record highs," the lawmakers said in a letter to be sent to the Environmental Protection Agency. "This means literally billions of dollars in increased costs for livestock and poultry producers, and food manufacturers."

And at least some of that cost increase is expected to be passed to meat packers and then, eventually, to consumers in grocery stores. The USDA predicted that the price of all food will climb 3% to 4% next year due to the drought.

John Bryant, chief executive of the Kellogg Co. (K), known for brands such as Corn Flakes, Eggo and Nutri-Grain, said Thursday he supports requests for a reduction in the mandate.

"To continue to have 40% of the U.S. corn crop going into ethanol production is very questionable policy," Mr. Bryant said.

The letter follows a petition filed with the EPA earlier this week by representatives of the U.S. livestock industry, asking the agency to halt the ethanol mandate for a year.

The EPA, under the authority of the Clean Air Act, does have the authority to temporarily halt or reduce the mandate for ethanol production that is required by the federal Renewable Fuels Standard.

The agency, which denied a petition by Texas Governor Rick Perry in 2008 to reduce the mandate, said it will only issue a waiver if the mandate is shown to "severely harm the economy of a state, region, or the United States."

Dave Warner, a spokesman for the National Pork Producers Council, said the coalition of livestock groups filed its petition Monday, but have not received a response yet from the agency. EPA officials were unavailable for immediate comment.

The letter from House members will be sent soon, a House aide said Thursday.

The National Chicken Council lauded the letter from lawmakers and urged the EPA to exercise the authority Congress gave it to reduce the ethanol mandate.

The Renewable Fuel Standard requires about 15 billion gallons of ethanol, mostly derived from corn, be blended into gasoline this year.

Swine, chicken, and turkey producers are scrambling to find the feed they need, the industry groups said, while the government continues to force about 40% of the U.S. corn crop into ethanol production. Cattle mostly graze on pastureland and are fed hay for most of their lives before they begin to consume corn- and soy-based feed shortly before slaughter.

"Drought is out of our hands and is absolutely unavoidable; however, the ethanol mandate is not and must be stopped," said J.D. Alexander, president of the National Cattlemen's Beef Association and a cattle rancher.

But ethanol proponents say the industry can't be blamed for the drought and there will be plenty of corn for all who need it.

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