New Proposal from Ethanol Industry Concerns AMI

US - The American Meat Institute (AMI) has joined a number of agriculture associations in expressing serious concerns over a new proposal from the ethanol industry.
calendar icon 3 November 2010
clock icon 4 minute read

The proposal would extend the expiring ethanol blenders credit and import tariff on foreign ethanol, create new corn ethanol subsidies and change the definition of 'advanced biofuels' to include corn ethanol in the Renewable Fuels Standard (RFS).

“Although we support the need to advance renewable and alternative sources of energy, we strongly believe it is time that the mature corn-based ethanol industry operates on a level playing field with other commodities whose largest input cost is corn,” states the letters to both House and Senate leadership. “Favoring one segment of agriculture at the expense of another does not benefit agriculture as a whole or the consumers that ultimately purchase our products.”

The letter notes that ethanol production is expected to absorb 4.7 billion bushels of corn in the 2009-2010 marketing year. Ethanol use accounted for approximately 14 per cent of total corn use in 2005-2006, and that per centage is projected to grow to more than 35 per cent in 2009-2010. If the definition of “advanced biofuels,” which was clearly stated in the 2007 Energy Bill, is changed to include corn ethanol, more than 50 per cent of the US corn crop will go into ethanol production.

As a response to federal incentives that favor a reliance upon corn-based ethanol, current market prices are 50 per cent higher relative to pre-RFS conditions. Because of this, animal agriculture has suffered serious economic hardships:

  • The turkey industry has endured the deepest cutbacks of any in animal agriculture – a decrease in turkeys raised of more than 6 per cent since 2007 levels and about 10 per cent reduction from 2008 levels – to adjust to these increased input costs. More importantly, the turkey industry eliminated nearly 3,000 jobs vital to rural America in 2008 and 2009 alone.

  • The US pork industry endured the two most challenging years in the industry’s history in 2008 and 2009. Total losses for the industry amounted to more than $6.2 billion and average farrow-to-finish operations lost nearly $23 for each animal marketed from October 2007 through January 2010. This financial disaster occurred despite near-record hog prices in 2008. The cause of the losses was higher production costs driven primarily by higher corn and soybean prices. Even now, projected production costs for 2010 are 25 per cent higher than the costs that prevailed from 2000 through 2006.

  • From December 2007 to February 2010 the cattle feeding sector of the beef industry lost a record $7 billion in equity due to high feed costs and economic factors that have negatively affected beef demand.

  • Rising grain prices driven by the voracious demand for feedstock from the heavily subsidized ethanol industry contributed to an increase of 16 per cent in the retail composite price of broiler chickens from September 2006 to September 2010.

“We support energy independence and the development of the renewable fuels industry, but we also support free, fair markets. This new proposal does nothing to develop the next generation of renewable fuels derived from non-feed and food sources. The federal government should move towards biofuels policies that do not force food and energy producers to compete with each other for key inputs and do not pick winners and losers in the alternative energy sector. We strongly encourage you to oppose an extension of the expiring corn ethanol blender’s credit and import tariff on foreign ethanol and this new proposal by the mature corn ethanol industry,” the letter concludes.

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