Biodiesel Producer Urges EPA To Resist Calls For Ethanol Mandate Cut

As livestock farmers call on the EPA to waive its requirement for corn ethanol production in response to this year's U.S. drought, a leading renewable fuels producer is urging the government to resist the pressure, saying a waiver of the corn mandate could undermine confidence in other biofuels, and even result in higher food prices. Renewable Energy Group, the largest U.S. producer of biodiesel, argues that any easing of the corn-ethanol requirement would create uncertainty for all biofuels, raising concerns in the industry about the sustainability of market demand.

Although REG does not produce ethanol, it fears that a waiver of even part of the Renewable Fuel Standard could have effects that go beyond the demand for corn at a time when drought has sharply reduced production. REG argues that a waiver on ethanol could open up RFS2, the revised five-year-old standard that sets minimum levels for the use of renewable fuels as a partial substitute for gasoline or diesel, for suspension or waivers on those sections of the federal mandate that cover biodiesel or other renewable fuels.

Farmers who produce beef, poultry, eggs, dairy, and other products that depend on corn for livestock feed are calling for a cut in the ethanol mandate that takes up some 40 percent of the U.S. corn crop. They argue that such a cut would help offset the sharply higher corn prices that have resulted from crop yields at their lowest since 1995 and production that has dropped to its lowest for six years in response to sustained high temperatures and low rainfall in many grain-producing states.

With the biodiesel industry paying more for the greases, oils, and fats that come from crops and livestock, farmers will be more likely to raise those animals or crops because of the extra income they generate.

The sustained agricultural output boosts supply and helps to keep down food prices for consumers; but a cut in the government-led demand for corn – and by extension other biofuels – could lead to a simultaneous cut in the farm products associated with them, he added.

A recent study by economists at Purdue University found that corn prices would fall the more the EPA reduced its requirement for ethanol production but would remain above those expected before the drought even under the biggest projected cut in the ethanol mandate.

The RFS2 standard calls for the production of 36 billion gallons of renewable fuel a year by 2022, or around three times current output.

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