The ethanol industry should share more of the risk with livestock farmers if the corn crop is short due to a combination of bad weather and high demand for biofuels.
That was the view of the National Pork Producers Council (NPPC) in testimony last week before the National Research Council in Washington, DC.
NPPC board member Randy Spronk called it “bad policy” to force livestock farmers to bear almost the entire risk of rationing if there is a short corn crop.
While pork producers have strong sentiments about federal ethanol policies, they strongly support increasing the production of renewals fuels as vital to U.S. energy and security needs, said Spronk, a hog and crop farmer from Edgerton, MN.
Spronk pointed out that 2008 and 2009 turned out to be two of the most challenging years in history for pork producers, due in large part to high feed costs triggered by a doubling in demand for corn for use in ethanol. That demand increase was driven by the 2007 Clean Energy Act, which mandated a massive boost in the use of ethanol and other renewable fuels in gasoline, linking the price of corn to gas.
Just the hint of a short corn crop in 2008, Spronk said, was enough to send corn prices soaring and to force corn supply rationing. This resulted in pork producers suffering enormous losses and many small- and medium-sized pork producers exiting the business.
The pork industry remains “exceedingly vulnerable” to a repeat of 2008, Spronk said. He cited a recent university study predicting a 1-in-10 chance of bad weather reducing this year’s corn crop enough to raise prices from $4/bu. to $6-7/bu.
NPPC has offered some solutions including advocating federal policies that take into account serious, weather-induced grain production shortfalls and that address how the problems associated with a short corn crop can be shared equitably among all grain users.
NPPC has also called for moving the ethanol industry away from current federal renewable fuels policy toward the next generation of biofuels by allowing the tax credit for blending into gasoline and the tariff on imported ethanol to expire.