Texas Governor Rick Perry is throwing his hat into the ring in support of a request for an Environmental Protection Agency (EPA) waiver of the Renewable Fuels Standard (RFS) mandate that he says is needed to keep livestock feed costs down as drought conditions across Texas and much of the nation threaten to decrease corn supplies and drive feed prices higher in the months ahead.
Perry joins the Governors of Arkansas, Georgia, New Mexico, North Carolina, Maryland, and Delaware in response to an EPA request for comment on the issue. Joining state governors who are requesting a waiver are a number of Congressional leaders and cattle and other livestock groups who say the nation’s cattle industry could be stressed further if demand for feed from corn is driven higher by poor forage crop production a second consecutive year.
Last year’s drought in Texas caused many cattle producers to reduce herds because of the high price and lack of hay. Similar conditions are being felt across other areas of the country this year.
EPA made the request for a 30-day comment period on Aug. 20. This marks the second time Perry formally made a waiver request from the EPA on the issue, the first was in 2008. That request was rejected.
Perry made the most recent request in a letter he sent last week to EPA officials in Washington.
"The forecasts are dire, as crop yield and overall productions are projected to be lower than anticipated," Perry said in the letter. "Additionally, forage availability has been severely diminished, with more than 55 percent of the country's pastureland damaged by drought. Conditions regarding mandated ethanol production and the corn market are also markedly different in 2012 than 2008. Requirements for ethanol derived from corn starch have increased more than 60 percent.”
Perry argues that domestic corn production across the U.S. will be even lower than it was in 2008 while more of the U.S. corn crop will be devoted to ethanol production than ever before.
“More than 40 percent of the U.S. annual corn supply was to be used to meet the RFS corn-based ethanol requirement [and that] threatens the sustainability of our agriculture producers," the letter reads.
In addition, Perry says the RFS mandate is driving up grocery prices and will continue to put increasing pressure on agricultural enterprises.
EPA has continually argued that corn for feed will not be jeopardized by the RFS standard and will have little effect on feed prices. EPA officials also argue that the RFS standard is a necessary component of U.S. energy strategy and that a waiver from the standard is unnecessary.
The National Cattlemen’s Beef Association has announced they support an RFS waiver program because of the extensive pressure on cattle producers caused by the drought. NCBA officials claim the RFS mandate creates an “uneven playing field for farmers and ranchers” and says it has already had a direct effect on the cost of feed.
In his letter last week, Perry argued that without a waiver from the mandate, consumers may also see a spike in prices at the grocery store.
In spite of current efforts in support of a waiver program, however, two separate studies recently released by leading university agricultural economists concluded that waiving the Renewable Fuel Standard (RFS) would not result in meaningfully lower corn prices.
Both Purdue University and Iowa State University economists conclude little economic benefit, if any, would come from curtailing the RFS mandate. The Purdue University analysis indicated that the existing flexibility built into the RFS serves to reduce corn price without a waiver being necessary. The Iowa State study found that fully waiving the RFS would result in just a 7.4 percent reduction in corn price in the 2012-2013 marketing year.
The Renewable Fuel Standard mandates just over 13 billion gallons of ethanol be produced this year and nearly 14 billion in 2013.
Supporters of a RFS waiver say drought conditions now are affecting more than 70 percent of cattle productions in the U.S.