Drought Ignites Battle over Corn Supplies; U.S. biofuel mandate pits ethanol refineries against meat producers
AUGUST 18, 2012
By: JOHN H. CUSHMAN JR., The International Herald Tribune
Three big intertwined but rival American agribusinesses – corn farmers, meat and poultry producers, and biofuel refineries – are in a political fight to protect their interests as a drought ravages corn producers and industrial consumers alike across the United States.
At issue is whether to suspend a five-year-old federal mandate requiring more ethanol content in gasoline each year, a policy that has diverted almost half of the domestic corn supply from animal feedlots to ethanol refineries, driven up corn prices and plantings, and created a desperate competition for corn as the drought has gripped the nation’s farm belt.
Meat producers are demanding that the administration of President Barack Obama waive the ethanol quota to ease rising feed prices. But ethanol producers worry that the loss of the quota would undermine the ethanol industry and do little for corn farmers but drive down the price of their stunted harvest.
The meat industry, backed by several governors, lawmakers and even international food agencies, argues that the quota has distorted grain markets by sucking up corn when ranchers can least afford it.
But the ethanol industry says that its corn consumption is down 12 percent since the start of the summer and that weekly ethanol production is at a two-year low. As corn prices have risen, refineries have scaled back production, idled dozens of plants and sold ethanol inventories. As a result, the industry may consume 10 percent less of this summer’s crop than last years, government and industry officials said.
”The market is already responding to the reality of this drought,” said Agriculture Secretary Tom Vilsack, a former Iowa governor who supports the quota.
Meat and poultry producers countered that the government was still ”picking winners and losers” and urged the Obama administration to ”let the market work and embrace free-market principles,” as J.D. Alexander, president of the National Cattlemen’s Beef Association, put it when he announced a petition to waive the quota two weeks ago.
Four governors, dozens of senators and scores of House members have petitioned the administration to waive the ethanol standard.
Corn growers, caught in a political tug of war between their biggest customers, are asking the government to move cautiously, if at all. (Many ethanol refineries are owned by corn farmers.)
”We have great concern and empathy for not only our members who are suffering, but all who we supply,” said Garry Niemeyer, president of the National Corn Growers Association, in a statement this week. ”This includes the domestic livestock sector, our export customers, the domestic food industry and the ethanol industry. All are suffering because of the drought.”
The corn farmers said a waiver should be allowed only if careful study showed a severe economic impact.
So far, the Obama administration seems inclined not to interfere. The president ”has been a strong believer in ethanol,” a spokeswoman, Jennifer Psaki, said during Mr. Obama’s trip to Iowa this week. ”He absolutely believes in it – he thinks it’s a driver of the economy here and a key […]