Texas Governor Rick Perry today submitted a request to the U.S. Environmental Protection Agency (EPA) for a waiver of the Renewable Fuels Standard (RFS) mandated by the Energy Independence and Security Act of 2007 that requires fuel producers to use at least 36 billion gallons of ethanol by 2022. The requested waiver is for a 50 percent reduction in the RFS.
Texas Corn Producers Association, Corn Producers Association of Texas and Texas Grain Sorghum Association are very disappointed in the governor’s request he submitted without soliciting input from the state’s grain producers. The request only takes the livestock sector of the Texas economy into account and ignores the potential impacts a waiver would have on all crops grown in Texas.
“We are concerned that a waiver of the RFS would have a negative impact on the cost of fuel in this state and this country,” said Scott Averhoff, Texas Corn Producers Board. “Transportation costs are a significant part of every dollar spent on food, and an increase in fuel will continue to drive up the cost of food. The general consumer will feel the strain on all consumer goods.”
A study recently completed by the Agricultural & Food Policy Center at Texas A&M showed that the price of corn has an insignificant impact on the price of food. This study, which was commissioned by the governor and the Texas Commissioner of Agriculture, Todd Staples, also showed that a waiver on the RFS would have little to no impact on the price of corn.
The study did not prove what the governor had originally hoped, but instead showed that the grain sector provides $2.7 billion to the Texas economy. In addition, the A&M study showed that corn prices have only affected the fed cattle-feeder steer price spread, whereas labor costs have largely affected all facets of livestock production in Texas.
“We are disappointed, yet not surprised, that the governor has chosen to ignore the true facts that are causing higher food prices at retail and press forward with a request to lower the renewable fuels standard, which will affect our producers’ bottom line in a negative manner,” said Dan Krienke, a farmer in Ochiltree County and president of the Texas Grain Sorghum Association. “Likewise, we are equally disappointed that the commissioner of agriculture concurred with the waiver request.”
The governor has chosen to take sides on an issue that will have a negative impact on some segments of the agricultural economy of Texas, and the cost to the consumer at the grocery store and the fuel pump.
“This could potentially cause acreage swings and breaks in market prices if the demand for corn is reduced,” Averhoff said. “Any significant break in the price of corn will throw our corn farmers into an economic loss just like the governor is trying to fix for the livestock sector.”
In his letter to the EPA, Gov. Perry states the USDA projects 30-35 percent of United States’ corn crop will be used to produce ethanol in 2008, which he claims will have a negative impact on the state’s livestock industry. However, the governor fails to mention that Texas’ three operating ethanol plants, which are producing between 100 and 340 million gallons a year, are located in the heart of the state’s livestock industry and produce a bountiful supply of distillers grains, a byproduct of ethanol that is used as a high quality feed ration for livestock.
Texas drivers last week paid an average of $3.41 per gallon of regular unleaded gasoline at the pump. The addition of ethanol in gasoline lowers the price between $.29 and $.40 per gallon. Without the influence of ethanol, gas prices would be in the range of $3.70 to $3.80 per gallon.
“Gov. Perry’s short-sighted decision is good news for our enemies who want to see the United States stay dependent on foreign oil,” said Darol Lindloff, chief executive officer of Panda Ethanol. “As the governor of the nation’s leading oil state, he would rather send $1.3 billion dollars a day oversees for the purchase of foreign oil than use it here at home to help farmers pay for their ever increasing production costs.”
Lindoff said the governor’s ill-informed position is driven by special interest groups and has no regard for the energy security of our nation. “And as a waiver of the renewable fuel standard will have little or no impact on the price of corn, it is evident that he is more concerned with political expediency than he is the facts.”
“The Governors decision to ask for the waiver shows lack of understanding of the issues as it relates to food prices,” said Omer Sagheer, vice president of marketing and public policy for White Energy Holding Company, LLC, who also has ethanol plants in the Texas panhandle. “A reduction in the RFS will drive up fuel prices and will increase food prices for the consumers, not just here in Texas, but around the country.”