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Restaurant study on RFS is a big turkey

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  • A recent column in the Wall Street Journal, written by the executive director of the National Council of Chain Restaurants, blasted the federal ethanol mandate, blaming it for distorted commodity markets and higher grocery bills.
  • The study used to make this claim was more conjecture than fact, especially regarding the use of dried distillers grains.

Writing in the Wall Street Journal last week, Rob Green, executive director of the National Council of Chain Restaurants, came down pretty hard on the renewable fuels standard (RFS), blaming it for distorted commodity markets and higher grocery bills.

The study he cited was about as insightful as a stuffed turkey.

National Corn Growers Association president Pam Johnson said, “A half-baked report from the lobbyists for chain restaurants does not serve up an accurate picture of ethanol’s impact when it comes to boosting jobs in rural America, lowering fuel prices or helping increase energy independence by expanding domestic, renewable fuel use in the United States.”

That’s not to mention that the study was a couple of plates shy of a full table setting.

The PricewaterhouseCoopers study Green cited claimed that to meet the federal ethanol mandate of 15 billion gallons of ethanol in gasoline annually by 2015, “5.3 billion bushels of corn per year – equal to more than 40 percent of the 2011 corn crop – must be processed and burned as ethanol, not used for food or livestock feed.”

Not true. A whole lot of dried distillers grains, a by-product of the corn-for-ethanol process, goes back into the market as livestock feed, changing the percentage considerably.

You’d think the folks at PwC would have dug a little deeper to find that little morsel? Guess not.

I’m also a little perplexed by the study’s claim that that the federal ethanol mandate costs the typical chain restaurant $18,000 per year, per restaurant location, and by Green’s claim that this money “could otherwise go to building new restaurants, expanding operations or hiring new workers.”

Is Green saying that restaurants absorb higher food costs associated with the ethanol mandate? Or perhaps a decline in patronage has occurred? He doesn’t explain, but if it’s the former, I had the idea restaurants typically pass food costs on to consumers.

In any event, everything is costing more these days, and everybody is looking for somebody or something to blame.

Meanwhile, a much more reputable study from the Food and Agriculture Policy Research Institute found that a year-long waiver of the RFS in 2012-13 would reduce corn prices by only 4 cents per bushel, reduce corn ethanol production by 1.3 percent, increase corn for livestock by less than one percent and decrease beef prices by 1 cent per pound.

There’s also the impact that ethanol has had on the cost of fuel. For example, in May, the Center for Agricultural and Rural Development released a study finding that in 2011, ethanol reduced wholesale gasoline prices by $1.09 per gallon nationally. That reduced the average household spending on gasoline by $1,200 last year.

According to the Renewable Fuels Association, this meant Americans saved an average $29.13 on an average Thanksgiving trip. That’s enough to buy a much more agreeable stuffed turkey than the one Green tried to serve up.

 

Discuss this Blog Entry 1

Anonymous (not verified)
on Dec 3, 2012

I operate a feedlot with my family. Because we live in an area that is not well suited for corn growing, we have always purchased a little more than half of the corn required to feed our cattle each year. I don't need to reference any fancy study or any witty writer to tell you that since the government decided to support the destruction of the American corn crop we have bled away 20 years of equity just trying to stay above water, especially after 2007/2008 when they ramped everything up. Not only is it nearly impossible to outbid the local ethanol plant, who has guaranteed demand for their worthless product on their side, it was (and still is) incredibly difficult to even find anyone who was willing to sell us any corn. Who would want to bring anything here when they can get $1 over the market and get paid in two days?
It is laughable that for years American farmers prided themselves on being hardworking, independant people who just want to be left to the business of growing crops, but immediately latched on to the artificial market created by none other than the government. They are losing credibility in the eyes of the consumer, coming off as greedy and insensitive as they blindly try to justify an artificially supported product while the end user is left to struggle with blown engines, reduced fuel mileage, and high food prices, among a long list of other negatives.
All I read from the pro-mandate writers is that everyone else is wrong, ethanol is really great, and everyone really, really likes having it around. Here is my response that nobody has ever been able to answer: if everyone really, really likes it, why don't you agree to eliminate the mandate? If it is a desirable product, nothing will change...demand might even increase once you don't have that pesky 10% blend limit. You all say ethanol is wonderful, but have yet to prove that on the free market. That seems a little perplexing to me.

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