Two new studies released June 9 warn if the Environmental Protection Agency (EPA) grants a petition for a 50% increase in the allowable limits of ethanol in gasoline, the result will be higher commodity costs for livestock and poultry producers. Advanced Economic Solutions and FarmEcon LLC completed the reports for the Grocery Manufacturers Association and the National Turkey Federation, respectively.
“It is clear that increasing the amount of biofuels added to be blended into gasoline will contribute to dramatic growth in the demand for corn, and consequently the price of corn. As we have already seen, a combination of factors – both economic and legislative – has driven ethanol use beyond mandated levels. Barring a change in government support for ethanol, if the EPA allows blends of more than 10% ethanol, our study projects that by 2015 up to 110 million acres of corn will be planted, constituting the highest number of acres planted since World War II and nearly a 20% increase over the baseline,” says Bill Lapp, president of Advanced Economic Solutions.
His study, “Implications for U.S. Corn Availability Under a Higher Blending Rate for Ethanol: How Much Corn will be Needed,” also examines the potential impact of a serious shortage of corn, especially if the “blend wall” is raised to 15%.
“U.S. corn yields have been 7% or more below trend roughly one out of every four years. A 7% yield loss would equate to over 1 billion bushels, more than the projected carryout during 2010-2015,” he says.
The study “Issues with an Ethanol Blend Rate Increase” by Tom Elam examines the impact increasing ethanol blends in gasoline will have on the price of corn fed to livestock and poultry. With corn the top input cost for animal agriculture, the study correlates the cost of meat and poultry to consumers in the future.
“U.S. biofuels policies and regulations contain inherent contradictions, and have also resulted in significant economic damage to diverse sectors from inside and outside of the energy industry. Increasing the maximum blend of ethanol in gasoline, combined with higher 2010 Renewable Fuels Standard requirements, will increase cost pressures on both ethanol and food producers,” says Elam, president of FarmEcon LLC.
View the Advanced Economic Solutions Study by Bill Lapp.
View the FarmEcon LLC Study by Thomas Elam.
View the letter sent by 21 members of the U.S. Senate to the EPA requesting further testing before approving any increase to the ethanol blend level.
The National Pork Producers Council has asked the Obama administration to lead an effort to review the impact of an expansion of ethanol production on corn availability, the price elasticity of corn, the users of corn and rural workers and industries associated with corn.
The American Farm Bureau Federation has called on the federal government to increase the ethanol blend level up to 15%, suggesting it will protect the environment, help create jobs and reduce dependence on foreign oil.