In Drought's Wake, EPA Receives Requests to Change Ethanol Mandate

Just prior to USDA cutting its feed corn crop estimate over a billion bushels, and raising its price projection by more than $2 to nearly $9 a bushel in a single month, twenty-five senators requested that the Environmental Protection Agency adjust the country’s ethanol mandate in an early August letter, adding to calls from other politicians and industry groups that the Obama Administration to take action, according to The Food Institute Report.

Just prior to USDA cutting its feed corn crop estimate over a billion bushels, and raising its price projection by more than $2 to nearly $9 a bushel in a single month, twenty-five senators requested that the Environmental Protection Agency adjust the country’s ethanol mandate in an early August letter, adding to calls from other politicians and industry groups that the Obama Administration to take action, according to The Food Institute Report.

Based on USDA’s latest Supply and Demand estimates, The Food Institute notes that some 4.5 billion bushels of this year’s overall corn production of 10.8 billion bushels is slated to go to ethanol production. And although that is down from the 4.9 billion bushels projected in July, it is a larger share of the overall crop, -- 41% -- than the 38% portion projected last month. Unfortunately, however, even adjusting the mandate would likely have little impact on the price of corn notes The Food Institute due to the complexities in the mandate itself and the need for corn at the refineries even without the mandate.

The bipartisan group of senators, including Dianne Feinstein (D-CA) and Saxby Chambliss (R-GA), urged EPA Administrator Lisa Jackson to use waiver authority to adjust the mandate for the Renewable Fuels Standard (RFS) as corn prices reach record highs and drought continues to affect the country.

The letter follows an Aug. 1 petition signed by 156 representatives in the House of Representatives urging Mrs. Jackson to “consider a fair and meaningful nationwide adjustment” to the standard and “take the necessary steps to protect American consumers and the economy.” On July 30, a coalition of meat and poultry organizations also asked EPA to waive the federal mandate for the production of corn ethanol. Industry groups composing the coalition included the NATIONAL PORK PRODUCERS COUNCIL, NATIONAL CHICKEN COUNCIL, and NATIONAL CATTLEMEN’S BEEF ASSOCIATION.

Looking forward, The Food Institute reports that many industry analysts see feed corn prices topping $10 a bushel as a result of the severe drought this year. And while this will mean higher meat and poultry prices in 2013, in the short term prices for those proteins could move lower as more animals are slaughtered to avoid paying those higher prices for grain in the future.

You can follow these developments more closely in upcoming issues of The Food Institute Report and at www.foodinstitute.com.