A bipartisan coalition of members of Congress, led by U.S. Representatives Bob Goodlatte (R-Va.) and Jim Costa (D-Calif.), heeded concerns of livestock producers that current U.S. renewable fuels policies are artificially manipulating corn prices and putting a strain on corn supplies.
The lawmakers have introduced the Renewable Fuels Standard (RFS) Flexibility Act of 2011, which will tie the amount of corn ethanol production required under the RFS to U.S. corn supplies.
“The federal government’s creation of an artificial market for the ethanol industry has quite frankly created a domino effect that is hurting consumers. It is expected that this year about 40 percent of the U.S. corn crop will be used for ethanol production,” penned Reps. Goodlatte and Costa in a letter to their colleagues in the U.S. House of Representatives.
“Our legislation will alter the RFS to give relief to our livestock and food producers and consumers of these products. This is a common sense solution to make sure we have enough corn supplies to meet all of our demands.”
During a recent hearing of the House Subcommittee on Livestock, Dairy and Poultry, Steve Meyer, president of Paragon Economics, a livestock and grain marketing and economic advisory company in Adel, Iowa, said on behalf of the National Cattlemen’s Beef Association (NCBA), that since 2004, the last year before the RFS was implemented, corn used for ethanol production increased from nearly 1.4 billion bushels to an estimated 5 billion bushels in 2010-2011, a 382 percent increase.
Corn production increase
However, he noted corn production has only increased by 5.4 percent over that same time period.
Meyer said in his opinion, these differing growth rates and subsequent unprecedented low carryover stocks were primarily caused by ethanol subsidies and guaranteed market.
Specifically, the legislation will set up a process to require the administrator of the Environmental Protection Agency to review twice yearly the U.S. Department of Agriculture’s (USDA) report on the current crop year’s ratio of U.S. corn stocks-to-use in making a determination on the RFS. In years with tight stocks-to-use ratios, a reduction to the RFS could be made.
Kevin Kester, California cattleman and president of the California Cattlemen’s Association, an affiliate of NCBA, said this legislation will provide relief from tight corn supplies.
He said it is important to note that had the RFS been in place since 1969, according to an analysis by Paragon Economics, a reduction in the RFS would have only been triggered five times.
“Cattlemen are not opposed to ethanol and we’re not looking for cheap corn. We simply want the federal government to get out of the marketplace and allow the market to work,” Kester said during a news conference.
“USDA has projected this year’s corn crop will be more than 400 million bushels smaller than last year. Supplies are already tight due to drought, floods and rising demand, driven partially by the mandate.
“A smaller corn crop will put even further strain on corn stocks. It’s time to add a layer of commonsense to our nation’s renewable fuels policy. We commend Congressmen Goodlatte and Costa for their leadership on this issue and we urge all members of Congress to support this bill.”