What is in this article?:
• The Environmental Protection Agency is authorized to waive the national RFS if the agency determines that the mandated biofuel volumes would cause “severe harm” to the economy or the environment.
• As the corn crop shrinks and prices rise, a number of trade organizations, governors of several states, as well as members of the House of Representatives have urged the Environmental Protection Agency to waive the mandate for ethanol.
Barry Carpenter, CEO of the North American Meat Association said a waiver is necessary“to ensure an adequate supply of corn for America’s livestock producers and others who put food on the tables of American consumers.”
A waiver request by the National Pork Producers Council (NPPC) and others stated, “The drought-induced reductions in the corn supply mean that the mandated utilization of corn for renewable fuels will so reduce the supply of corn and increase its price, that livestock and poultry producers will be forced to reduce the size of their herds and flocks, causing some to go out of business and jobs to be lost.
“In addition to this direct harm, these herd and flock reductions will ripple through the meat, milk and poultry sectors, causing severe harm in the form of more job and economic losses. This drought-induced harm exists now, will continue to exist into the latter part of 2012 and 2013, and could continue to be felt in 2014 depending on the policy choices made now.”
Other items of interest:
Cooper, the RFA’s vice-president of research and analysis, says flexibility in the ethanol mandate allows the industry to participate in demand rationing, at least for another year. He noted that since early June, the ethanol industry has reduced corn consumption by 12 percent, approximately 1.5 billion gallons of capacity has been idled, and many other plants are operating well below capacity. In addition, ethanol production has fallen to a 2-year low in response to high corn prices, which has pushed ethanol stocks to high levels.
The effect of corn demand rationing in the ethanol industry is on par with that of other end users, according to Cooper. USDA’s August estimate of supply and demand numbers for corn estimated a 13 percent reduction in seed and residual use, a 13 percent reduction in distillers grains, an 8 percent reduction in ethanol production, a 19 percent reduction in exports and a 5 percent reduction in food, seed and industrial use.
Cooper noted that if the ethanol market does get tight, refiners will draw on stocks first. If they become short on physical gallons, refiners can use excess or “banked credits,” which are known as RINs (renewable identification numbers) for compliance. Refiners can meet as much as 20 percent of their obligation using RINs generated in the previous year, which for last year is equivalent to 1 billion bushels of corn. If the refiner is short on physical gallons and RINs, the refiner can carry the compliance deficit forward one year.