Livestock producers target ethanol mandate

WASHINGTON - With ethanol subsidies all but dead, livestock producers are now hoping to weaken another federal program that promotes use of the renewable fuel.

Subsidies helped push up the cost of ethanol - and of corn. But the subsidies' demise isn't enough for livestock producers who say corn, which is nearing $8 a bushel, is becoming too expensive to feed their animals.

“We should require the ethanol industry to bear some of the same risks that pork producers and other corn users bear from market supply and price shock,” Randy Spronk, vice president of the National Pork Producers Council, told a House Agriculture Committee panel last week.

At that hearing, representatives from the beef, poultry, dairy, animal feed and pork industries urged lawmakers to change the law so an ethanol mandate is reduced when corn prices are high and corn supplies are scarce.

That mandate, the Environmental Protection Agency's Renewable Fuel Standard, known as RFS, requires that a certain amount of ethanol be blended with gasoline. It also requires refiners to increase their use of corn ethanol from about 13 billion gallons a year to 15 billion gallons by 2015.

A 45-cents-a-gallon tax credit that's given to refineries to blend ethanol is slated to expire at the end of the year. Tariffs that help limit the amount of ethanol imported to the United States also will expire Dec. 31.

Steven Roger Meyer, president of Paragon Economics Inc. in Adel said last week's revised Department of Agriculture estimates of corn yields, down five bushels an acre, may result in scarcity. He also said Iowa, a top corn producer, is primed for a crop-killing drought.

Meyer said 23 years is the longest period between droughts in centuries in Iowa. This year marks 23 years since Iowa's 1988 drought and “we are now counting and are now well overdue” for another devastating drought, Meyer added.

“Our expectation is that significant food inflation is on its way,” Meyer testified.

In this cost-conscious Congress, the political popularity of ethanol subsidies that cost billions of dollars has plummeted. The industry has a better chance of defending the RFS said Matt Hartwig, spokesman for the Renewable Fuels Association, because it brings down the price of gasoline.

He said Congress should let market forces determine the price and availability of corn and that price increases on meat, dairy and poultry provide producers with big profits, even as the cost of feed has risen.

“These are the same kind of crocodile tears we've heard from livestock producers in the past,” he said. “There will be enough corn. And if corn prices get too high, ethanol users will ration its use.”

The EPA can reduce the mandate if it causes economic harm. But the livestock industry has not been able to persuade the EPA to do so. It rejected a request by Texas Gov. Rick Perry - a contender for the Republican presidential nomination - to suspend the RFS in 2008.

Many members of the House Agriculture panel sympathized with the concerns of the corn users.

“The U.S. livestock, dairy, and poultry industries are confronting incredibly tight feed supply prospects,” said House Agriculture Committee Chairman Rep. Frank Lucas, R-Okla.

But Iowa Rep. Leonard Boswell, a Democrat, objected to the panel's assertions that ethanol production is to blame.

“I don't think ethanol is causing problems,” Boswell said.

He said corn price spikes and scarcity is the result of “speculators who have jumped into ethanol.”

“I think we have to have the renewable fuel industry come in and see what they have to say about it,” Boswell said.