Meat&Poultry - August 2012 - 12

Business Notes

Industry argues pros and cons of waiving RFS
A coalition of meat and poultry organizations implored the US Environmental Protection Agency at the end of July to waive the federal mandate for the production of corn ethanol. The coalition, in a petition delivered to EPA Administrator Lisa Jackson, requested a waiver “in whole or in substantial part” of the amount of renewable fuel that must be produced under the Renewable Fuels Standard (RFS) for the rest of 2012 and for the portion of 2013 that is one year from the time the waiver becomes effective. Industry members signing the petition include the American Meat Institute, National Cattlemen’s Beef Association, National Chicken Council, National Pork Producers Council, National Turkey Federation and the North American Meat Association. In addition, a bipartisan group of 156 members of Congress signed a letter to Jackson calling for an ethanol waiver. The RFS requires 13.2 billion gallons of corn-based ethanol to be produced in 2012 and 13.8 billion gallons in 2013, amounts that will use about 4.7 billion and 4.9 billion bushels, respectively, of the nation’s corn. Some ag forecasters now estimate only 11.8 billion bushels of corn will be harvested in 2012 – about 13 billion were harvested in 2011 – this means cornethanol production will use about four of every 10 bushels. Larry Pope, chief executive officer of Smithfield Foods Inc., called for cuts to the federal ethanol mandate in an opinion piece that appeared in the Wall Street Journal July 27. His letter came a day after ethanol advocates released a study that claims to show that cuts to the federal mandate wouldn’t reduce corn prices as much as the livestock industry would hope. “The RFS has diverted so much corn as a questionable substitute for gasoline that in the face of this drought-depleted harvest, major foodproducing companies such as Smithfield are being forced to seek alternative markets for grain to meet the demands of their livestock and at more affordable prices,” Pope wrote. “Ironically, 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.” Smithfield buys roughly 128 million bushels of corn and corn equivalents annually to feed 16 million pigs on farms across 12 states, Pope 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 wrote. “For the fi rst time in memory, corn is cheaper when it’s delivered to the US from abroad than if it’s purchased from domestic suppliers. “Smithfield was forced to take the unfortunate but absolutely necessary step of buying corn from Brazil,” he added. In response to Pope’s piece, US Sen. Charles Grassley delivered withering criticism of Pope in a speech on the US Senate floor. The senator’s comments were printed in the Des Moines Register as an opinion piece. Grassley dismissed the claim that ethanol consumes more corn than animal agriculture, saying that one-third of the corn re-enters the market as dried distillers grains. “I would imagine that millions of hogs raised by Smithfield every year are fed a diet containing this ethanol co-product. Mr. Pope appears unaware of its existence. When distillers’ grains are factored in, 43 percent of the corn supply is available for animal feed. Only 28 percent is used for ethanol,” Grassley said. ■

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Meat&Poultry - August 2012

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