September 30, 2012
No reason to reduce the Renewable Fuel Standard (RFS)
Published in The Lincoln Journal Star
Big Food companies have been abusing the drought conditions facing farm families to spread a campaign of misinformation against ethanol production and the Renewable Fuel Standard, putting 400,000 American jobs at risk at a time we can least afford to lose them. We want to set the record straight:
MYTH: Renewable fuels are driving up the price of corn.
TRUTH: The primary driver of the volatility in the corn market is Mother Nature. The U.S. is facing the most difficult drought in the last 50 years. This is driving the price of corn.
MYTH: The only way to alleviate high corn prices is to waive the RFS.
TRUTH: Waiving the RFS is not necessary. In fact, the free market is already addressing the supply and demand issues.
• Because Americans are driving less with the down economy, there is a surplus of ethanol. There is a 30 day supply of ethanol in storage — the equivalent of 350 million bushels of corn.
• Because more biofuels have been produced than the RFS called for each year since 2005, fuel blenders have built up 2.6 billion excess RFS credits that can be used to meet RFS goals — the equivalent of approximately 850 million bushels of corn.
• As corn prices have risen, renewable fuel producers have reduced production by 150,000 barrels a day since last year.
• Domestic feed demand will decline as cattle herds are slaughtered due to inadequate pasture and forage caused by the drought. Nearly 80 percent of a beef cow’s weight comes from pasture and forage, not corn.
• In addition, exports of corn and ethanol are declining, and some estimates are that this reduction could reach 500 million bushels this year — bolstering domestic livestock feed supplies.
MYTH: 40 percent of the corn crop goes to biofuels.
TRUTH: Biofuel production only removes the starch from the corn. The protein, fiber, and oil is all returned to the animal feed supply in the biofuel feed co-product known as Distiller’s Grains. Distiller’s Grains amount to one third of the corn used in ethanol production. In addition, since Distiller’s Grains are 75 percent the cost of regular corn, it takes 1.33 bushels of regular corn to equal the value of Distiller’s Grains. Lastly, Distiller’s Grains also replace soybean meal in feed rations, meaning there is less demand for soybeans, requiring fewer acres planted to soybeans. Only 16 percent of net corn acres are used for renewable fuels:
Big Food companies have been trying to cripple the RFS since it was passed into law. This is because for decades Big Food companies relied on government-subsidized corn that farmers produced below their production costs. Their strategy appears to be a push to return to the days of cheap subsidized corn with expensive government farm programs. Without government subsidies and without the demand pull from ethanol the end result would be a significant reduction in the corn supply because farmers would stop planting corn. Without the demand of corn for ethanol there would be less corn available.