Cattlemen ask for level playing field for a bushel of corn

Oct 19, 2012

Biofuels opponents continue the quest to end national corn ethanol requirements following the continued decline in estimated yields and a continued rise in corn prices.

The drought has given ranchers an additional arguing point relating to the Renewable Fuel Standard (RFS) that requires refiners to blend 13.2 billion gallons of corn ethanol into traditional fuel this year.

In an attempt to bring relief to rural America, which is suffering from the worst drought in more than 50 years, the National Cattlemen’s Beef Association (NCBA) filed official comments Monday, Oct. 15 urging Environmental Protection Agency (EPA) Administrator Lisa Jackson to waive the RFS mandate for the production of corn ethanol.

“NCBA’s membership supports the American ethanol industry and we are committed to energy independence. However, this energy commitment has created challenges for America’s cattlemen and women now more than ever due to the current drought plaguing 70 percent of cattle country,” said NCBA President J.D. Alexander, a Nebraska cattleman and corn grower.

“The production of ethanol from our main feedstock—corn—is significant to the cattle industry because of its impact on its availability and on corn prices. Our membership strongly opposes mandates on production and is simply asking for a level playing field when competing for a bushel of corn.”

According to the comments submitted by NCBA, the October 2012 USDA crop report estimates that corn production is forecast at 10.7 billion bushels, down slightly from the September forecast and down 13 percent from 2011. According to the report, if the projections are realized upon harvest, this corn yield will be the lowest since 1995.

“The single most challenge for all of agriculture is Mother Nature. Coupled with an inflexible mandate, the federal government adds another level of uncertainty into a marketplace that is not market-driven,” said Alexander. “This further shows the need for Administrator Jackson to use the authority granted by Congress and waive the mandate for corn ethanol production.”

In the comments, NCBA stated that the cattle industry, along with other livestock groups, has suffered a significant economic impact due to the RFS mandate and the drought. From December 2007 to August 2012, the cattle feeding sector of the beef industry lost a record $4 billion in equity due to high feed costs and economic factors that have negatively affected beef demand.

According to USDA reports, corn prices have increased about 60 percent since June 15, 2012, and the near futures price is hovering around $8 per bushel. In a report by USDA’s Economic Research Service, 2011 feed costs for livestock, poultry and dairy reached a record high of $54.6 billion—an increase of more than $9 billion over 2010 costs. The cost increase, according to Alexander, is not able to be passed along to the consumer and is absorbed by cattle producers.

“This trend is not sustainable for the beef industry and our government policies need to be evaluated in a manner that considers economic impacts on all users of corn, not just the ethanol industry,” he said. “We are looking at the smallest cow herd since 1952, and if input costs continue to increase, we do not expect this trend to turn around in the next several years.”

Environmental groups have also posed potential problems with the RFS. Some worry the RFS accelerates soil erosion and water pollution through over-harvesting corn. They also argue that tying corn to fuel raises prices, creating food security problems for poorer foreign countries.

“If the U.S. only produces 10.8 billion bushels of corn and 5 billion bushels still goes to make ethanol, a shrinking percentage of corn is left for food and feed. It is time to rethink ethanol mandates that ensure that cars eat before people,” Marie Brill, senior policy analyst with international antipoverty group ActionAid USA, said in a statement.

While the cattle industry is working for a waiver, the National Corn Growers Association (NCGA) claims the request is still premature, and is busy trying to find a balance between their customers.

“We have great concern and empathy for not only our members who are suffering, but all who we supply,” said Garry Niemeyer, president of NCGA, in a statement in August. “This includes the domestic livestock sector, our export customers, the domestic food industry and the ethanol industry.”

NCGA also submitted comments this month to EPA, from their different perspective, expressing strong support for the RFS.

“NCGA and our member associations have long supported the RFS2, including the waiver provision process,” wrote NCGA President Pam Johnson, an Iowa corn grower. In response to a 2008 waiver request, EPA had established that severe harm to the economy attributed to the RFS was one of only two grounds for granting a waiver. “We believe the burden of proof for severe harm to the economy falls on the petitioner,” Johnson said. “Since higher feed prices are only one piece of a complicated economic puzzle, we believe the petitioners have failed to establish this proof.”

NCGA also pointed out that, with harvest still underway, a complete count of the 2012 corn crop is unavailable, and that this information is needed for an informed decision by EPA.

“USDA will continue to refine the crop production estimates throughout the fall,” Johnson noted. “There is potential for this yield forecast to change, up or down, as well as future changes in harvested acreage. Based on these crucial changes, we encourage the Agency to wait until USDA has produced the November report before making any decision tied to corn availability.”

Although most livestock groups have lobbied for some waiver relief from the RFS, a large waiver may not be in their best long-term interest, NCGA’s comments state. Most notably, reducing the amount of corn processed for ethanol will cause a reduction in distillers grains. Several recent studies have analyzed potential impacts on the feed markets from reductions in the RFS. While a waiver may modestly lower corn prices, reduced distillers grains availability and increased soybean meal costs will negate a significant portion of the savings from reduced corn prices.

The RFS, NCGA asserts, has been a success. According to NCGA’s release, since its enactment in 2005, and expansion in 2007, it has increased national energy security by creating a market for renewable fuel as a substitute for petroleum-based fuel thereby accelerating the nation’s progress toward energy independence; contributed to the reduction of greenhouse gas emissions, thereby reducing the nation’s contribution to global climate change; and had an overall positive impact on the U.S. economy. — Traci Eatherton, WLJ Editor