Companies Lose Ethanol Mandate Fight

by | Nov 19, 2012

The EPA rejected requests to waive the federal Renewable Fuel Standard requiring ethanol be blended into gasoline, effectively disagreeing with states and industry groups that argued the mandate was pushing up corn prices following a catastrophic drought that ruined crops in the Midwest.

The agency, which based its decision on economic analyses and modeling done in conjunction with the US Department of Agriculture and Department of Energy, concluded the mandate would not cause severe economic harm. An analysis with the USDA showed on average waiving the Renewable Fuel Standard would only reduce corn prices by about one percent. The analysis with the DOE showed waiving the mandate would not impact household energy costs.

The meat industry, which relies heavily on corn to feed livestock, and several industry groups, including the National Council of Chain Restaurants, were disappointed with the ruling and said they will now face higher prices. The NCCR, a division of the National Retail Federation, said it will continue to lobby policymakers. It argues that the law unfairly distorts the market at the expense of chain restaurants and everyone else involved in the food supply.

Companies and business groups vested in ethanol and biofuels cheered the decision. They included BIO, an industry group representing 1,100 biotechnology companies, academic institutions, state centers and related organizations, including DuPont, enzyme company Novozymes, and ethanol producer POET.

The widespread drought, the worst in the US in five decades, pushed the global food price index up six percent in July, according to a report by the United Nations’ Food and Agriculture Organization. The USDA expanded drought assistance in September to crop and livestock producers in 22 states.

The drought pushed up prices of feed for chicken, hogs and cattle, forcing ranchers to either find cheaper sources of feed or slaughter animals sooner, which has squeezed profits of food companies.

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