Top officials of the nation’s livestock and poultry producer organizations issued a petition on Monday urging the Environmental Protection Agency (EPA) to waive the Renewable Fuel Standard (RFS) and its mandated ethanol production as this summer's severe and widespread drought has decimated the U.S. corn crop driving prices to all-time highs.
Groups signing the petition include the National Pork Producers Council (NPPC), National Cattlemen’s Beef Association (NCBA), National Turkey Federation (NTF), and the National Chicken Council (NCC).
The petition urges EPA Administrator Lisa Jackson to reduce or waive the amount of ethanol production mandated by the federal government in 2007.
Of note, Texas Gov. Rick Perry attempted to get the EPA to waive the mandate in 2008, but it was denied. “We are under very different economic conditions today,” said Michael Formica, NPPC’s chief counsel. The point being the widespread drought and the extreme level—cited as the nation’s worst drought in 50 years.
Written into the RFS is the opportunity for EPA to waive the ethanol mandate if there is “severe economic harm,” Formica said. “An interested person is allowed to petition,” which he pointed out is what these national livestock groups represent. “We are asking EPA director, Lisa Jackson, to use her position to waive this rule.”
The coalition is seeking relief from record high corn prices brought on by the current drought and aggravated by the RFS, according to the group. “We believe the RFS is causing severe economic harm during this crisis,” said Tom Super, vice president of communications, National Chicken Council.
The 2007 Energy Independence and Security Act, which expanded the fuels standard, granted EPA the authority to waive the annual volume of renewable fuel that must be produced in the event of severe economic or environmental harm. The RFS requires 13.2 billion gallons of corn-based ethanol to be produced in 2012 and 13.8 billion gallons in 2013, amounts that will use about 40 percent of the U.S. corn crop.
Beyond the dramatic rise in prices, livestock and poultry producers are struggling to have enough corn, soybeans and other crops to feed animals. It is threatening livestock and poultry producers’ ability to stay in business. “A large portion of the country is suffering its worst drought in more than 50 years,” said Randy Spronk, Edgerton, Minn. pork producer and NPPC president-elect. “NPPC and other organizations are asking for help. We are requesting the EPA to waive all or a portion of the ethanol mandate to address the dire situation brought on by the severe drought.”
“It is part of the law,” said John Berkel, a Minnesota turkey producer and National Turkey Federation vice chairman. “I hope the administration acts now—if not now, when? How bad does it have to get?” He noted that he has already canceled some of his orders for turkeys in 2013 due to the rising costs.
While NCBA supports ethanol production, it does not support federal mandates selecting “winners and losers,” said J.D. Alexander, a Nebraska cattleman and NCBA president. “I am asking the federal government to let the market work.” Alexander noted that he has already cut his operation to 60 percent of capacity. “We just can’t make the numbers work. We’ve cut back and many of our neighbors have too.”
Meanwhile the drought continues to widen, damaging more acres and driving up corn prices. Corn futures were sharply higher on Monday at a record of $8.20 per bushel. “The prospect of ongoing drought conditions has caused farmers and market analysts to lower their expectations about the potential of the current corn and soybean crops,” according to the CME Daily Livestock Report.
Thomas Elam, president, FarmEcon, LLC, points out that in June, USDA projected corn yields of 166 bushels per acre this year; by mid-July trade expectations dropped that to 138 bushels; now with crop scouting underway, reports are closer to 120 bushels per acre. On Aug. 10, USDA will make its first crop report based on actual field observations.
The National Corn Growers Association (NCGA), staunch supporters of the RFS, were quick to react to the coalition request. “NCGA stands firm in its support of the Renewable Fuel Standard and will strongly oppose legislation to alter or repeal the RFS," said NCGA president Garry Niemeyer. "Likewise, we believe it is premature for a waiver of the RFS provisions at this point. With the crop still in the field, it is too early to determine this year’s final corn supply. In addition, the ethanol industry now has a significant surplus of ethanol and RFS credits that can greatly offset ethanol’s impact on the corn supply."
Niemeyer pointed out that the nation's corn farmers are on the front line of the drought. “Many of our farmer members are suffering immensely from the drought," he said. "Many are also in the same predicament as our customers because they have livestock or own ethanol plant shares. Now is the time for all of American agriculture to pull together and work together for solutions that benefit us all.”
Last week, in an editorial to the Wall Street Journal, Smithfield Foods' Chief Executive Officer C. Larry Pope said in addition to a temporary waiver, Congress should pass a bill that would lower the federal RFS when corn supplies fall below a certain threshold. A bipartisan bill has been introduced in the House to address this. It is sponsored by Reps. Bob Goodlatte, R-Va., and Jim Costa, D-Calif.
As the world's largest pork prodcer, Smithfield is reported to purchase about 128 million bushels of corn or corn byproducts a year.
Other groups signing the petition on Monday included the American Feed Industry Association, American Meat Institute, American Sheep Industries Association, California Dairy Campaign, Dairy Producers of New Mexico, Dairy Producers of Utah, Idaho Dairymen’s Association, Milk Producers Council, Nevada State Dairy Commission, North American Meat Association, Northwest Dairy Association, Oregon Dairy Farmers Association, Southeast Milk Inc., United Dairymen of Arizona and the Washington State Dairy Federation.