E15 push raises cattle country concernsWritten by Jennifer Womack
The letter was sent to Secretary of Energy Steven Chu, Secretary of Agriculture Tom Vilsack, Environmental Protection Agency (EPA) Administrator Lisa Jackson and Assistant to the President for Energy and Climate Change Carol Browner.
“The blend percentage is currently set at 10 percent,” wrote NCBA, “which is causing significantly more competition for corn and driving up feed costs for cattle producers.”
NCBA asked the decision makers to oppose “any administrative or legislative efforts to increase the amount of ethanol permitted to be blended with gasoline.” Vilsack has stated that an increase into the 12 to 13 percent range could be made at the discretion of the EPA.
“As you know,” wrote NCBA, “current corn-based ethanol production is capped at 15 billion gallons, which is the equivalent of 10 percent of the U.S. projected gasoline market. Increasing the blend percentage to 15 percent would mean the immediate addition of 4.5 billion gallons of ethanol, and would require an extra 1.6 billion bushels of corn. Based on 2008 yields, to reach this level an additional 10.4 million acres of corn would need to be planted.”
NCBA wrote, “Corn ethanol production is significant to the cattle industry because of its impact on feed grain prices. Since January of 2008, cattle feeders have lost a record $4.3 billion in equity because of high feed costs. The additional 1.6 billion bushels of additional corn needed for an E15 blend percentage is equivalent to the entire amount of corn the cattle industry utilizes in one year.”
Talk of increasing the blend percentage has also earned the attention of the Colorado-based Livestock Marketing Information Center (LMIC). “USDA, along with ethanol producers,” said a March 20 paper released by the group and written by Mississippi State University Economists under the direction of Dr. John Anderson, “appears to be pursuing an increase in the ethanol blend limit as a means of providing financial relief to the ethanol industry with little consideration of how such an increase might affect participants in related markets.”
The LMIC paper says, “For livestock producers, who have already experienced a dramatic rise in production costs over the past two years, a further increase in ethanol production represents a potentially serious challenge.” Increases, they said, could further drive ongoing contraction in the beef, pork, poultry and dairy sectors.
Early on by-products were thought to be an alleviation factor for ethanol production’s impact on the cattle sector, but according to Anderson’s paper, “…so far byproducts prices and corn prices remain closely correlated. If corn prices move higher, the price of substitutes will move higher as well.”
The National Corn Growers Association supports the increase. A posting on their website from the Illinois Corn Growers Association calls for an immediate increase to E12 or E13 with further consideration for E15 says increasing the blend rate would “stimulate the rural economy.” The group says two billion gallons of capacity are sitting idle in their state. “Many other plants in Illinois are in crisis due to the lack of blending opportunities,” says the group citing plants on the verge of bankruptcy. “Increasing the level of allowable blends will help return these plants to full operation and full employment.”
“The marketplace offers many adequate risk management tools, which when combined with good business practices,” wrote NCBA noting their support for energy independence, “help build a competitive and strong industry. Cattle producers do not support government interventions via subsidies and mandates; these practices disrupt the market and are never substitutes for good business practices.”