ANALYSIS - Opinions are divided over the US Environmental Protection Agency's (EPA) decision to deny a waiver of the Renewable Fuels Standard (RFS), with livestock producers and organisations declaring their 'extreme disappointment', writes Editor, Gemma Hyland.
The EPA made its announcement on Friday (16 November), following months of rallying from producers to waive the RFS, a law introduced in 2005, requiring 13.8 billion gallons of corn-based ethanol to be blended into gasoline in 2013, an amount that will use about 4.5 billion bushels of the nation’s corn crop, according to the US Department of Agriculture.
Unsurprisingly, livestock producers have been left disappointed by the decision, after this years drought pushed feed prices higher and higher.
“In light of the most widespread drought to face the country in more than 50 years, the refusal to grant this waiver is a blatant example of the flawed policy of the RFS,” said National Cattlemen’s Beef Association (NCBA) President JD Alexander, a cattle feeder from Pilger, Neb.
“The artificial support for corn ethanol provided for by the RFS is only making the situation worse for cattlemen and women by driving up feed costs.”
“Our message to EPA and Administrator Jackson is how bad does it have to get for livestock producers before relief is brought to rural America? Cattlemen and women are only asking for a level playing field,” Mr Alexander said. “With EPA’s refusal to grant a waiver when faced with these conditions, it is clear the RFS is not working as Congress intended.”
USDA’s 9 November crop report puts this year’s corn harvest at just 10.7 billion bushels, down 13 per cent from last year and down 28 per cent from USDA’s May projection. The ethanol industry will use more than 40 per cent of the corn supply next year.
Further, the carry-over stocks for 2012-13 are now forecast at 647 million bushels, less than five per cent of expected corn usage and the lowest amount ever. This is a 35 per cent decrease from last year’s carry-over amount. This means there likely would be no corn reserves for next year should the country experience another poor crop.
A coalition of livestock, poultry and dairy organisations have also expressed extreme disappointment with the decision.
“How many more jobs and family farms have to be lost before we change this misguided policy and create a level playing field on the free market for the end users of corn?” the coalition asked. “It is now abundantly clear that this law is broken, and we will explore remedies to fix it.”
Support shown for EPA
However, there has been support for the EPA's decision, with the Advanced Ethanol Council (AEC) claiming a waiver of the RFS would have done little, if anything, to reduce grain prices.
"Waiving the RFS would have hurt consumers at the pump and undercut investment in advanced biofuels," said Brooke Coleman, Executive Director of the AEC.
"Congress was right to protect the RFS from specious and politically-motivated waiver arguments, and to include in the program explicit flexibility provisions that allow the standard to adjust to changing market conditions.
"The RFS is well-designed and is the primary reason why the United States has emerged as the global leader in the development of advanced biofuels. There will be other stalking horses advanced by the oil industry to weaken the RFS, but it is a step in the right direction to put this one behind us.”
The US National Farmers Union (NFU) also expressed support for the EPA, with President Roger Johnson commenting: “We are pleased with EPA’s decision not to waive the Renewable Fuel Standard for this year. The RFS has helped reduce our dependence on foreign oil from 60 per cent in 2005 to 45 per cent today and currently supports almost 500,000 American jobs and generates $53 billion in economic activity each year. Furthermore, the existing structure of the RFS provides sufficient market flexibility in case of a drought or other market disruption.
“It is crucial that we maintain a stable and long term biofuels policy in order to incentivise the commercialisation of next generation biofuels," Mr Johnson concluded.
Defending their decision, Gina McCarthy, Assistant Administrator for EPA’s Office of Air and Radiation, said: “We recognise that this year’s drought has created hardship in some sectors of the economy, particularly for livestock producers, but our extensive analysis makes clear that Congressional requirements for a waiver have not been met and that waiving the RFS will have little, if any, impact.”
To support the waiver decision, EPA conducted several economic analyses. Economic analyses of impacts in the agricultural sector, conducted with USDA, showed that on average waiving the mandate would only reduce corn prices by approximately one per cent.