Oct 19 2012
In 2007, Congress reauthorized the Renewable Fuel Standard, an excessive regulation that requires a certain percentage of fuel to be made from renewable sources such as corn-based ethanol. As the mandate for corn-as-fuel rises, so does the price. The Heritage Foundation calculates that ethanol production will increase the price of corn by up to 68 percent worldwide. As the cost of corn rises, so will the price of countless other products directly and indirectly related to corn production.
Record-level droughts are also significantly affecting corn prices and causing great pain around the country. According to the USDA, almost forty percent of the corn produced this year is of a "poor to very poor" quality and the per-acre yield in the United States will be it’s lowest level in almost 20 years. These drought conditions, which have been declared "natural disasters" in 26 states, combined with the burdensome RFS, create a very difficult environment for agriculture. The USDA also predicts food prices will rise by more than the normal 3 to 4 percent next year as a result. Corn yields are down but prices are up, hurting consumers, livestock and poultry producers, food manufacturers and foodservice providers.
So what can we do about it?
As part of the Energy Independence and Security Act, Congress authorized the administrator of the Environmental Protection Agency to adjust the Renewable Fuel Standard in the event that farms could not produce enough corn or to avert economic harm to the country. I believe current conditions meet that standard and have written to Lisa Jackson, head of the EPA, to use her authority to waive the RFS requirement until the country can restore normal crop yields.
In the letter, I wrote, "The Renewable Fuels Standard (RFS) mandate exacerbates this upward pressure on the price of corn by creating artificial demand for corn, and the downstream effects have been devastating to America’s food producers and consumers. Congress has provided you, as administrator of the Environmental Protection Agency, with the authority to waive the RFS mandate in an effort to help both business and consumers and to protect our economy. I encourage you to exercise that authority immediately."
Shrinking supply and higher demand are a recipe for disaster but it’s one that the Environmental Protection Agency largely has the ability to control. Waiving the RFS standard will relieve much of the pressure the industry is feeling and keep prices under control for consumers. Bruce Babcock from Iowa State University estimates that waiving the mandate would moderate corn prices by 8 percent. The administrator of the EPA was given this power for just this purpose. She should use it to provide the needed relief to the agricultural industry as a whole and to all American consumers.