As drought hammers the Midwest Corn Belt, ruining yields and farmer livelihoods, calls to amend the renewable fuel standard are coming out of the shadows once again.
In an editorial in the Wall Street Journal, C. Larry Pope, president and CEO of Smithfield Foods, Inc., which purchases roughly 128 million bushels of corn and corn equivalents a year from U.S. farmers and feeds over 16 million pigs on farms across 12 states, said, “This year, the double whammy of a drought that’s ravaging crops and ethanol demand has pushed corn prices to what are now record high levels of over $8 per bushel, a quadrupling of prices in less than a decade.”
Pope says Smithfield “was forced to take the unfortunate but absolutely necessary step of buying corn from Brazil – spending money that under normal circumstances would have gone to U.S. farmers.”
Pope puts much of the blame squarely on corn for ethanol saying if the ethanol mandate did not exist, “even this year’s drought-depleted corn crop would have been more than enough to meet the requirements for livestock feed and food production at decent prices.”
As has been the case for years, critics of corn for ethanol hardly mention the significant impact of dried distillers grains (DDG) on corn-for-feed availability. DDGs have to be part of the equation when determining the net impact of corn ethanol on corn supply.
When we make fuel, we also make feed, noted Dave Vander Griend, president and CEO of a Kansas company that designs and builds ethanol plants. “DDGs return a substantial one third by volume to the feed supply.”
The nutritional value of DDGs is even greater – 50 percent of raw corn. “When we harvest an acre of corn for ethanol production, we’re actually only using half of the equivalent of that acre to make ethanol,” Vander Griend said. “The other half is returned in nutritional value to feed livestock for the human food supply.”
Lawmakers recently called for the EPA to waive the RFS for the rest of the year, thinking it would lessen the impact of corn-for-ethanol on corn supplies. According to Bob Dinneen, president and CEO of the Renewable Fuels Association, the idea is “void of justification and premature.”
One reason is that some 2.5 billion ethanol credits have been “banked” in years past “as refiners used more ethanol than was required by the RFS. Should ethanol production be short this year, refiners can use these excess credits to show compliance with the RFS. “By substituting these credits for physical gallons of ethanol, demand for corn by ethanol producers would fall,” Dinneen said.
While there is concern about corn supply, now is not the time for kneejerk reaction by Congress or EPA. There’s no need to suspend the RFS, especially at a time when good prices are a lone salve for producers who still have corn to sell.