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USDA Estimates Shake Up RFS Debate

Drought continues its march across the country, leading corn growers, ethanol producers and livestock farmers into a great debate.

Published on: Aug 13, 2012

The release of the USDA Supply and Demand Report has caused the Renewable Fuels Standard to come under more scrutiny as corn yield estimates plummet.

Governors Martin O'Malley and Jack Markell of Maryland and Delaware, respectively, filed a letter to EPA administrator Lisa Jackson asking for a waiver of the RFS.

Because the request comes from state governors, the EPA will have 90 days from receipt of the letter to make a decision on the future of the RFS. In the letter, the governors voiced their support for a previously filed petition for RFS waiver from the National Chicken Council and a collection of other industry groups.

The governors' letter said failing to repeal the RFS would cost their states thousands of jobs. They said a waiver would "put downward pressure on corn pricing," and that food prices would increase due to the undersupply and expense of corn.

Drought continues its march across the country, leading corn growers, ethanol producers and livestock farmers into a great debate.
Drought continues its march across the country, leading corn growers, ethanol producers and livestock farmers into a great debate.

The governors estimated that Delaware and Maryland farmers will see a 40% yield decrease for corn, and will therefore need to rely on the equally-stressed Corn Belt region for their corn needs.

"In 2012, more than 40% of the U.S. annual corn supply was to be used to meet the RFS corn based ethanol requirements established annually by the EPA. If you were to exercise your statutory authority to waive the RFS standards for the next year, it would make more than 5 billion bushels of corn available to the marketplace for animal feed and foodstuffs, driving down costs and significantly lessening the financial impact to Delmarva's poultry farms and consumers," the governors wrote.

The National Corn Growers Association also sounded off following the USDA report. In a statement regarding the USDA report, NCGA President Garry Niemeyer said the report confirms concerns that the corn crop yields may be lower than originally estimated.

"Our nation's farmers have done all they can to increase the corn supply, planting the most corn acres our country has seen since 1937 this year. Thankfully, this additional acreage and innovative agronomic practices will make an important difference, and we remain hopeful that above average yields in some areas will further augment the crop. At the same time, we recognize that it will not fully cover yield concerns," Niemeyer said.

He explained that corn farmers are in a similar predicament as corn buyers, because they too have shares in ethanol plants or own livestock. He said agriculture must work together to find a solution.

NCGA suggested that consumers retain perspective on the cost of food and the amount of corn used to produce meat or items directly made from corn. Niemeyer said USDA projects the total impact of the drought on retail food prices to be less than one percent.

Both Growth Energy and the Renewable Fuels Association stood by the RFS. RFA released a statement explaining that yield losses for crops and livestock are to be expected in a drought, but there is still no reason for an RFS waiver.

"Given the abundance of RFS credits, ample ethanol stocks, and various other flexibilities, obligated parties under the RFS will have every opportunity to demonstrate compliance this year," the RFA said.

"Moving forward, the market remains the best option for rationing corn demand.  The market has already begun taking advantage of the RFS' flexibility and will continue to do so into 2013.  As the crop is not yet in the bin, we do not know the final harvest.  Nor do we yet know how farmers around the world will respond or how American farmers will react next spring."

Growth Energy provided a similar response, but said if a waiver was granted, it would be to the benefit of big oil. "The current policy has flexibility built in for exactly these types of situations," they wrote.

Despite the ongoing discussion about the RFS, groups also turned attention to the Farm Bill, waiting for passage by the House.

25x'25 Alliance Policy Committee Chairman Bart Ruth said the hardships faced now need a different action, not an RFS waiver.

"The Alliance understands the hardships being faced by many in U.S. agriculture today, particularly livestock producers, and would suggest the best response  is for Congress to adopt a new five-year farm bill that provides adequate disaster assistance for all of those in need," Ruth said.