Can we trust grain forecasts?
With USDA estimates of this year's corn yield tightening, some groups are wondering if offering incentives for grain-based ethanol production is the right way to go.
In a press conference Thursday, agricultural economist Thomas Elam, president of FarmEcon, LLC and Congressman Bob Goodlatte (R-Va.) said that lower yields could create a demand disaster when combined with the Renewable Fuels Standard.
The RFS legislation, which took effect in 2005, will require that 15.2 billion gallons of ethanol are produced this year. Livestock groups and opponents of the RFS say that mandate is driving the cost of corn up, therefore inflating the cost to livestock producers and the cost to consumers.
Elam, author of "The RFS, Fuel and Food Prices, and the Need for Statutory Flexibility," said the RFS has done little to secure price stability for grocery staples. Poultry, meat and dairy products have been hit hard by price inflation.
Elam explained that these food prices have risen dramatically post-RFS legislation, despite other economic factors, and he warned that subsidizing grain production for ethanol will only make matters worse.
Rep. Goodlatte took Elam's warning and introduced two bills that could alter the RFS, one of which will completely eliminate the RFS and the other will reform it.
"There are real concerns about having enough corn supply to satisfy the RFS and the needs of our food producers," Goodlatte said. "We should not be in a position where we are choosing between fuel and food."
The bill, titled "Renewable Fuels Standard Flexibility Act" (H.R. 3097), is sponsored by Rep. Goodlatte and Rep. Jim Costa, (D-Calif.).
It would require a biannual review of ending corn stocks relative to their total use, and if the ratio is under 10%, 7.5%, 6%, or 5%, the RFS would be reduced by 10%, 15%, 25%, or 50%, respectively.
"The RFS has not provided relief for consumers at the pump," Goodlatte said. "Legislation like mine would offer benefits to all corn users."
Ethanol Proponents Speak Out
The food vs. fuel debate isn't anything new to the agriculture industry, but in times of drought the conversation seems to really heat up, and proponents of ethanol production say this year's corn yields shouldn't be creating so much alarm.
The National Corn Growers Association says the RFS works and even in times of lower yield and drought conditions, it still makes sense...
Source: Argentine Beef Packers S.A.