The National Pork Producers Council (NPPC) was “deeply disappointed” by Thursday’s decision by the U.S. Environmental Protection Agency to turn down a waiver of the federal ethanol production mandate for Texas, says NPPC President Bryan Black of Canal Winchester, OH.
Easing the waiver would have steadied feed supplies and prices and helped bring long-term stability to U.S. pork producers and consumers, according to NPPC.
“Pork producers need more time to adjust to the volatility of the grain markets and to the government’s ethanol mandate, which this year is requiring the ethanol industry to use about one-third of the total U.S. corn crop. That has contributed to the uncertainty with regard to feedgrain supplies and prices,” says Black.
The federal Renewable Fuels Standard (RFS) mandates 2008 production of 9 billion gallons of corn-based ethanol. To reach that goal will require more than 3 billion bushels of an expected harvest of less than 13 billion bushels of corn this year.
A waiver of the 2008 RFS would have cut the production mandate to 4.5 billion gallons. In 2009, the RFS jumps to 11.1 billion gallons.
Higher feed prices have pork producers tightening their belts. Feedgrain prices were already climbing in the summer of 2006, in part due to the rapid escalation in ethanol production. Since then, increased global demand for crops, weather conditions and the ethanol mandate have sent grain prices even higher. A bushel of corn for September delivery is now priced above $5, compared to around $7 in mid-summer and $2.60 in July 2006.
From September 2007 to April 2008, corn prices skyrocketed 124% and soybean meal prices shot up 94%. During that period, pork producers averaged losses of $30/hog marketed.
In June, NPPC urged EPA to grant Texas a waiver of the RFS to reduce the adverse affects of the ethanol mandate. The Texas pork industry generates more than 3,100 jobs and nearly $200 million in gross state income.
“The RFS has helped create one of the most volatile economic situations ever to hit pork producers,” explains Black. “We need relief, and the RFS waiver was one way the government could have provided it. Now we expect to see increasing pressure on the domestic pork industry, with the hog herd continuing to be reduced, producers going out of business, jobs being lost and retail pork prices rising.”