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Livestock groups hit ethanol mandate

DANIEL LOOKER 07/19/2012 @ 4:11pm Business Editor

The nation's top livestock groups organized a briefing for congressional staffers in Washington Thursday that supports altering U.S. energy law to shrink the mandate for ethanol use in short crop years like the drought of 2012.

"Unfortunately. government policies have only exacerbated this dire situation," said Representative Bob Goodlatte (R-VA), the vice chair of the House Agriculture Committee who last October introduced a bill to repeal the mandate, known as the Renewable Fuel Standard. Goodlatte has also introduced a bill (HR 3077) that would require EPA to reduce the RFS by up to 50%, depending on how tight the USDA stocks-to-use ratio is for corn.

"One of the big drivers of ethanol is an artificial market created by the federal government," said Goodlatte, who was at the briefing to introduce an independent economist, Thomas E. Elam, of FarmEcon LLC. Elam rolled out a study and slides that debunked the ethanol industry's claims that its fuel saves consumers money and reduces U.S. dependence on imported oil.  And it showed that the RFS has increased corn prices and food costs above the overall rate of inflation since 2007.

The effect of this support for ethanol, Elam said, is that "It's increased and destabilized corn prices." And it has diverted U.s. gasoline production into the export market.

Elam pointed out that this year's high corn prices have already led to the idling of at least three or four ethanol production plants. He

When asked by Agriculture.com if changing the RFS so that it reduces ethanol use would lead to a smaller ethanol industry, Elam replied, "If we can't produce enough corn, everybody has to shrink." Both the ethanol and livestock industries would cut back, resulting in lower corn prices that would benefit ethanol producers as well as livestock, he said. "The corn growers would be the losers," he said.

Elam's study shows that corn prices accounted for $43 billion of the nation's food costs last year, a much bigger share than any other commodity, with soybean meal and oil and wheat being the other basic commodities behind most foods as wells as meat, poultry, egg and milk production.

The briefing was sponsored by the American Meat Institute, California Dairy Inc., Milk Producers Cooperative, National Cattlemen’s Beef Association, National Chicken Council, National Pork Producers Council and the National Turkey Federation.

It wasn't welcomed by the National Corn Growers Association (NCGA) or Growth Energy, an ethanol trade group.

“When it comes to the Renewable Fuel Standard for ethanol and other biofuels, now is not the time for changes. It’s working," NCGA president, Garry Niemeyer said in a statement.  "The RFS is revitalizing rural America, reducing our dependence on foreign fuel and reducing the cost of gasoline. Making changes to the RFS now would only ensure that consumers suffer due to significantly higher fuel prices."

“And while it is true that our corn crop is suffering, it’s still in the field," Niemeyer said. "We won’t know the actual size of the 2012 corn crop until months from now. In the meantime, the market is working. All corn users are responding to market signals. Ethanol production and exports are down. In addition, there is currently an ethanol surplus in the United States that will further reduce demand on the 2012 corn crop. Given the challenges of the drought and suffering of all farmers, now more than ever, U.S. agriculture needs to pull together.  NCGA will continue to help lead the way in trying to unite, rather than divide, American agriculture.”

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Thank You Dan 07/20/2012 @ 9:33am Thank you Dan for writing a very balanced and thoughtful article. I think in the past, most ag publications have published RFA, Growth Energy and NCGA propaganda almost verbatim implicitly accepting it as factual. We all know its mostly propaganda, so to have it offset with factual data from others who have been hurt by the RFS mandate (i.e. the average consumer and livestock groups) is refreshing. The fact that RFA and Growth Energy can't understand that burning up 40 percent of the corn crop into a fuel nobody wants in a severe drought year is astounding and reveals the greed and lack of compassion for greater society that is inherent in RFA, Growth Energy and NCGA.

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