RFA says ethanol waiver will be denied
A petition sent to the Environmental Protection Agency (EPA) by livestock and poultry groups seeking to suspend or substantially reduce the Renewable Fuel Standard (RFS) will likely be denied, Renewable Fuels Association (RFA) president and chief executive officer Bob Dinneen said on Tuesday. The petition was sent Monday by the livestock and poultry groups which are seeking relief from record-high feed prices brought on by the current drought gripping the nation’s Corn Belt.
Since the group that sent the petition is not a governor or an obligated party “they really can’t ask EPA to waive this program,” Dinneen said in Tuesday’s RFA Ethanol Report. “The EPA has made it very clear who can request a waiver in the past when they denied (Texas) Governor Rick Perry’s request in 2008.”
According to Dinneen, RFA’s focus has been on the merit of what the livestock and poultry groups are seeking and “it just doesn’t make any sense.” Dinneen said the waiver would only reward oil companies that have long opposed the RFS, result in a dramatic increase in gasoline prices and have no impact on corn prices.
“If the petition is accepted by the EPA it will be, and should be, rejected,” Dinneen said.
The ethanol industry also is suffering due to the high corn prices, Dinneen said. Ethanol producers “compete in this marketplace along with every other consumer of corn and we are impacted as much as anyone else.”
According to Bruce Babcock, Iowa State University economics professor, the effects of a waiver will depend on the final 2012 corn crop yield . “If the U.S. corn yield hits 130 bushels per acre or more then the impact of waiver is not large,” he said in comments to Pork Network. “However, if corn yields are a real historic disaster then a waiver could have a large impact.” Babcock recently published a study on the subject titled “Preliminary Assessment of the Drought’s Impacts on Crop Prices and Biofuel Production.”
According to Dinneen, the best mechanism to ration corn demand is indeed the marketplace, not the federal government. “And, you see that happening today.”
Gregory Page, the chief executive of Cargill, Inc., added his voice to the debate over the usage of corn to produce ethanol in the wake of the sharply higher grain prices, according to Reuters. "If all of that (demand rationing) is only on livestock (producers) or food consumers, it really makes the burden disproportionate. What we see are 3 or 4 percent declines in supply lead to 40 to 50 percent increases in prices, and I think the mandates are what drives that price elasticity which I think needs to be addressed," he said on CNBC.
Corn and wheat prices have risen about 50 percent in the last six weeks and soybeans by around 20 percent as U.S. crops continue withering from heat and drought.
Meanwhile, little relief for the crops is expected over the next two weeks in the Midwest. "About two-thirds of the belt will remain dry for at least 15 days. There will absolutely be more declines in conditions," said Don Keeney, meteorologist for MDA EarthSat Weather.
According to USDA’s National Agricultural Statistics Service (NASS), U.S. farmers planted 96.4 million acres of corn making it the highest corn acreage in the last 75 years.