Sunday, May 5, 2013

Livestock, poultry groups weigh in on Renewable Fuel Standard

Capital Press

High feed costs and manipulation of feed markets top the list of concerns voiced by seven livestock and poultry groups that have submitted comments on the federal Renewable Fuel Standard to the House Energy and Commerce Committee.

Central to the discussion is that the RFS is the primary force driving the rapid increase in U.S. ethanol production and taking corn off the market, the groups stated.

The RFS requires 36 billion gallons of biofuel be added to gasoline by 2022. Right now, that biofuel is primarily in the form of corn-based ethanol.

Increased corn use for ethanol production has caused corn stocks to decline to a crisis level and corn prices to reach record highs, the groups said. Chronically depleted stocks have also increased corn price volatility and caused markets for corn and other ag commodities to swing wildly on the whims of the weather, the groups said.

The groups also submitted a study they commissioned by Tom Elam of FarmEcon on the standard's effects on fuel and food prices and the need for RFS reform.

In that study, Elam pointed out that corn for U.S. ethanol production increased from 1.6 billion bushels in the 2005/2006 crop year to 5 billion in the 2011/2012 crop year. Over the same period, feed use of corn decreased from 6.2 billion bushels to 4.5 billion bushels.

Corn prices went from $2 a bushel in the 2005/2006 crop year to $6.90 for 2012/2013. During the same period, ending corn stocks went from nearly 2 billion bushels to 758 million bushels, and net corn exports declined from 2.1 billion bushels to 675 million bushels.

"Higher corn prices (and associated increase in wheat and soybean product prices) have dramatically raised the costs of producing meat and poultry," Elam said.

A fuel standard that requires a certain amount of corn to be used as fuel limits corn supply and raises prices. It's simply supply and demand, said Jeremy Russell, director of communications for the North American Meat Association, one of the groups commenting.

"We're only asking for a level playing field, and there shouldn't be subsidies (or mandates) that manipulate the corn market," he said.

The ethanol industry also submitted comments to the committee.

The Renewable Fuels Association said there is no dispute that the emergence of the ethanol industry has increased corn prices. But ethanol expansion and the RFS are only two of many factors in higher prices for ag commodities, and several studies have shown that RFS has very little impact on corn prices.

The livestock and poultry groups said such studies imply market forces are the primary driver of the ethanol market, but that is incorrect. The RFS has been the primary driver, they said.

That is evidenced by the fact that if there were market-based opportunities, biofuel investments would exist without mandates and subsidies. Further evidence is the biofuel sector's strong opposition to reforming the RFS, the groups said.

The Biotechnology Industry Organization also commented, saying the biggest impact on ag production, feedstocks for livestock producers and consumer food costs is the volatile price of oil.
There is no denying that the price of oil has and effect on the cost of inputs for producers, and it is one of several factors that producers can do very little about, but the effect of the RFS is government induced, and that can be changed, Russell said.

The livestock and poultry groups' comments and study were submitted on behalf of American Meat Institute, American Sheep Industry Association, Milk Producers Council, National Cattlemen's Beef Association, National Pork Producers Council, National Turkey Federation and North American Meat Association.

The committee initiated a series of white papers on several issues involving the RFS and is soliciting input from stakeholders. Its second white paper, Agricultural Sector Impacts, was released April 18 with a response deadline of April 29.


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