Oklahoma Pork Council Joins Call for RFS WaiverWed, 22 Aug 2012 15:33:17 CDT
The EPA is considering how to respond to formal requests from governors from five states to grant waivers to the Renewable Fuels Standard requiring ethanol be blended with gasoline. Prospects of a corn harvest significantly lower than USDA forecasts is putting upward pressure on corn markets, making livestock feed more expensive. Governors calling for the RFS waiver say it is necessary to prevent greater economic damage to livestock industries in their states.
Roy Lee Lindsey, executive director of the Oklahoma Pork Council, spoke with Ron Hays recently and says the issue is a huge one for hog producers. (Click on the LISTEN BAR below the story for the full interview.)
“When you start talking about raising hogs, it takes you somewhere in the neighborhood of six to eight bushels of corn to take a hog to market weight. Across the country we’re talking about a little over 100 million hogs. If you use the midpoint, you’re talking about 700 million bushels of corn just to get hogs to market weight.”
Lindsey says economists have estimated that a waiver of the RFS could potentially reduce corn prices by as much as $2.30 per bushel. Even if the impact were modest, say $1.00 per bushel, Lindsey says the nearly billion-dollar impact to producers and consumers is enormous and the issue of a waiver is worth serious consideration by the EPA. Both the Oklahoma Pork Council and the National Pork Producers Council have asked the EPA to grant a waiver.
The ethanol industry is not in support of a waiver at this time, saying there are other mitigating factors such as ethanol stocks on hand and credits for previous production which are moderating demand and its impact on prices.
“We would contend that the waiver was written into the Renewable Fuels Standard when it was created specifically to help us deal with a situation like we have today,” Lindsey says. “We’ve got a short corn crop and every report I read says it’s only worse than what we expect.”
Lindsey says the remedy for such a shortage is not government allocation, but rather allowing supply and demand to determine prices and allocation.
“We think the EPA should grant the waiver. And then if the marketplace says ‘We still need to buy ethanol’ to keep fuel prices down or to blend in due to Clean Air Act requirements, whatever the case may be, the market will adjust and it will incorporate ethanol in there. When we start a system that says we’re going to put four billion bushels of grain into ethanol, you’re not allowing the market to work if that’s where you start.
“So, if you could waive some of that mandate, a partial waiver, a full waiver, just for a short period of time, it will allow us to work through what is going to be an extremely short corn crop.”
Lindsey says allowing the market to set prices and allocate resources makes more sense given the fact that we can’t reliably predict the future. No one knows if weather patterns across the corn belt will return to normal next year, and it would be prudent to preserve as much flexibility and as much of the corn supply as possible going into next year’s crop.
Based on when the governors made their requests for waivers, the EPA has until the middle of November to act. Lindsey says he doesn’t expect they will move any quicker than they have to.
“I don’t think it’s likely they’re going to do anything on the mandate before the election. They’re trying to win Iowa. They’re trying to win a lot of those Corn Belt states and I don’t think they’re going to do anything to change the mandate and make that an issue in this presidential election.”
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