Midwest Flooding, Record Corn Prices Lead Experts to Urge EPA to Address Food Inflation Crisis
Economists, Environmentalists and Food Industry Leaders Call on EPA to Suspend and Revisit Ethanol Mandate
Washington, D.C., June 19, 2008 -
FOR IMMEDIATE RELEASE
Today, leaders in agricultural economics, the environment and the food industry urged the U.S. Environmental Protection Agency to revisit so-called “food-to-fuel” mandates in light of the recent tragic flooding in the Midwest and the skyrocketing cost of food around the world spurred by record commodity prices.
EPA is considering Governor Rick Perry’s (R – TX) ethanol mandate waiver request to reduce this year’s Renewable Fuel Standard (RFS) by half. The EPA’s public comment period on the request ends on Monday, June 23.
On a call with reporters, Dr. Thomas Elam of FarmEcon LLC also discussed the findings of a new analysis to be submitted to EPA on Monday. The study finds that the RFS – which mandates 9 billion gallons of ethanol be blended into the nation’s fuel supply this year – has a small impact on gas prices, but its “effects on food prices and security are huge.”
“It is clear that while America’s ethanol mandate has done little to hold down the steadily-climbing gasoline prices, its negative effects on the security of our food supply and the cost to feed our families are huge,” said Elam. “In light of recent events, it is imperative that the government re-examine and reduce these mandates. We are facing tighter and tighter supplies of grain that threaten to devastate meat, dairy and poultry producers and cause food price increases for the American consumer. The government must not allow this to happen.”
The call participants also expressed concern about the persistence of ethanol policy in the face of environmental as well as economic harms. "This year's 9 billion gallon RFS mandate will cause an estimated 100 million tons of soil erosion and put 300,000 tons of nitrogen fertilizer into Midwestern waters. Thanks largely to the ethanol mandate and an excessively wet spring, pollution levels in the Gulf of Mexico are expected to reach record levels, with a dead zone the size of Massachusetts," said Richard Wiles, executive director of the Environmental Working Group.
"That's a high environmental price to pay for a biofuels policy that is straining family food budgets for the poorest Americans, and is doing next to nothing to lower gas prices," Wiles concluded.
Representatives of the cattle and poultry industries echoed the urgency of granting the waiver request. Biofuel mandates, tariffs and subsidies have hit these industries particularly hard, as the corn and soy used to feed animals comprises the bulk of their input costs. In the six months since the current RFS became law, the price of corn has shot up by over $3 per bushel. Soy prices have also climbed to historic highs.
“Until the recent flooding in the Midwest began, it might have been acceptable to have a lengthy debate over ethanol mandates,” said James Herring, president and CEO of Friona Industries, the fourth-largest cattle feeder in the world. “But to be frank, floodwaters and high corn prices have wreaked havoc on the cattle industry and it is time to stop talking and take action.”
Herring added, “The beef industry has been able to hold off on increasing customer prices dramatically, but the cost of feed has now tripled and consumer prices cannot stay down forever. One-third of America’s corn crop is slated to become ethanol this year, but that corn could instead be used to feed people and animals and keep grocery bills from skyrocketing. The decision in the face of this looming emergency should be crystal clear. The EPA should grant Governor Perry’s waiver request.”
The potential for a scarcity of grain is becoming more pressing as Midwest flooding has affected this season’s corn and soy crops. Paul Hill, a turkey producer and Chairman of the Board of West Liberty Foods in West Liberty, Iowa has witnessed this disaster and its possible effects firsthand.
“The dramatic diversion of corn to our nation’s gas tanks had already led to alarmingly higher feed costs for America’s turkey growers and processors,” said Hill, who is also the Chairman of the National Turkey Federation. “The tragic flooding in my home state of Iowa has now called into question the very supply of the grain we count on to raise poultry and feed ourselves. Turkey farmers want a sustainable future in which government policies aren’t putting our businesses needlessly at risk. The EPA has the chance to take our foot off the ethanol accelerator and help stabilize out-of-control corn markets.”
The broiler industry is feeling a similar squeeze. “Rising corn and soybean prices have cost the broiler chicken industry approximately $5 billion since October 2006,” said Mark Hickman, head of Peco Foods, Tuscaloosa, Alabama, and former chairman of the National Chicken Council. “We are willing to compete in the marketplace, but it is not fair to expect us to compete with a government-subsidized market that will take one-third of the corn crop this year unless it is reformed.”
Rod Brenneman, President and CEO of Seaboard Foods, a major pork producer and processor in Kansas emphasized that although many other dynamics contributed to high food prices and production costs, biofuels policy is one factor the U.S. government can control.
“America’s livestock sector has proven itself very adept at responding to trends in the market and curve balls from Mother Nature, but now we are facing an overwhelming threat thanks to ethanol mandates,” Brenneman said. “We understand that current corn prices have been driven up by a number of factors, including increased export demands, floods here in the U.S. and rising transportation costs. But ethanol mandates are responsible for a massive and indefensible detour in our corn supply.”
Brenneman added, “The Environmental Protection Agency must do something now to help fend off the growing threat to our domestic food industry. There are many variables, like the weather, that are out of our hands. Government mandates, on the other hand, are certainly within our power to control, and the time to act is right now.”
The impact of biofuels on food prices is also being felt acutely by America’s food manufacturers, who have seen their cost of inputs rise with the price of eggs, milk and other basic foods that are pegged to the price of corn. Scott Faber, vice president for federal affairs for the Grocery Manufacturers Association, noted that without changes in the ethanol mandate these effects are only likely to get worse.
EPA must issue a decision on Governor Perry’s waiver by July 24.