NCBA Supports Legislation To Free Up Corn Supplies

US - With the increased use of corn for ethanol production, new legislation will provide relief from tight corn supplies for livestock producers and consumers.

6 October 2011

3 minute read

North America

A bipartisan coalition of members of Congress, led by US Representatives Bob Goodlatte and Jim Costa, heeded concerns of livestock producers that current US renewable fuels policies are artificially manipulating corn prices and putting a strain on corn supplies.

The lawmakers introduced the Renewable Fuels Standard (RFS) Flexibility Act of 2011, which will tie the amount of corn ethanol production required under the RFS to US corn supplies.

“The federal government’s creation of an artificial market for the ethanol industry has quite frankly created a domino effect that is hurting consumers. It is expected that this year about 40 per cent of the US corn crop will be used for ethanol production,” penned Mr Goodlatte and Mr Costa in a letter to their colleagues in the US House of Representatives.

“Our legislation will alter the RFS to give relief to our livestock and food producers and consumers of these products. This is a common sense solution to make sure that we have enough corn supplies to meet all of our demands."

During a recent hearing of the House Subcommittee on Livestock, Dairy and Poultry, Dr Steve Meyer, president of Paragon Economics, a livestock and grain marketing and economic advisory company in Adel, Iowa, said on behalf of the National Cattlemen’s Beef Association (NCBA), that since 2004, the last year before the RFS was implemented, corn used for ethanol production increased from nearly 1.4 billion bushels to an estimated five billion bushels in 2010-2011, a 382 per cent increase.

However, he noted corn production has only increased by 5.4 per cent over that same time period. Dr Meyer said in his opinion, these differing growth rates and subsequent unprecedented low carryover stocks were primarily caused by ethanol subsidies and guaranteed market.

Specifically, the legislation will set up a process to require the administrator of the Environmental Protection Agency to review twice yearly the US Department of Agriculture’s (USDA) report on the current crop year’s ratio of US corn stocks-to-use in making a determination on the RFS.

In years with tight stocks-to-use ratios, a reduction to the RFS could be made.

Kevin Kester, California cattleman and president of the California Cattlemen’s Association, an affiliate of NCBA, said this legislation will provide relief from tight corn supplies. He said it is important to note that had the RFS been in place since 1969, according to an analysis by Paragon Economics, a reduction in the RFS would have only been triggered five times.

“Cattlemen are not opposed to ethanol and we’re not looking for cheap corn. We simply want the federal government to get out of the marketplace and allow the market to work,” Mr Kester said during a news conference.

“USDA has projected this year’s corn crop will be more than 400 million bushels smaller than last year. Supplies are already tight due to drought, floods and rising demand, driven partially by the mandate. A smaller corn crop will put even further strain on corn stocks. It’s time to add a layer of commonsense to our nation’s renewable fuels policy. We commend Congressmen Goodlatte and Costa for their leadership on this issue and we urge all members of Congress to support this bill.”

The National Farmers Union (NFU) however has joined a letter in opposing Bob Goodlatte and Jim Costa, in regard to the RFS changes.

“This legislation represents backward-looking thinking regarding our economic and energy security,” said NFU President Roger Johnson.

“We need policy that continues to transition our economy away from imported fossil fuels and towards homegrown biofuels.”

NFU policy supports an expanded RFS and ambitious mandates for production of biofuels.