Dismal crop forecast fuels ethanol battle

Biofuels opponents amplified calls Friday to the Obama administration to end a national corn ethanol requirement following the release of disappointing crop yield estimates.

Agriculture Department predictions for corn supplies came in lower than expected in its biannual review. The 123.4 bushels per acre yield projected Friday is the lowest since 1995, and the anticipated 10.78 billion bushel haul would be the lowest since 2006.

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The drought has given environmentalists and ranchers an opportunity to criticize the renewable fuel standard (RFS) beyond their standard talking points. That rule requires refiners to blend 13.2 billion gallons of corn ethanol into traditional fuel this year.

Those groups posit that the RFS has exacerbated price shocks as corn supplies shrink during the drought.

"This just kind of confirms our concerns that shortages of corn are not out of the question," Colin Woodall, vice president of government affairs with the National Cattlemen's Beef Association, told E2-Wire on Friday. 

Environmental groups worry the RFS accelerates soil erosion and water pollution through overharvesting corn. They also contend tying corn to fuel raises its price, in turn causing food security problems for poorer foreign countries.

“If the U.S. only produces 10.8 billion bushels of corn and 5 billion bushels still goes to make ethanol, a shrinking percentage of corn is left for food and feed. It is time to rethink ethanol mandates that ensure that cars eat before people,” Marie Brill, senior policy analyst with international anti-poverty group ActionAid USA, said in a statement Friday.

Democratic Govs. Jack Markell of Delaware and Martin O’Malley of Maryland on Thursday filed petitions with EPA to waive the RFS. Interest groups cannot directly file a waiver request with the EPA.

The calls for changes to the RFS are coming from outside the United States as well. A United Nations official said Friday that the country must suspend biofuels production to soften the blow the drought is dealing corn supplies. He said that could help restore some stability to international food prices.

Biofuel industry group Growth Energy CEO Tom Buis, on Twitter, bashed the UN's "absurd attempts to intervene" in US energy and farm policy, calling it "simply outrageous." Growth Energy reiterated in a statement Friday that the corn yield would still be the eighth largest in history.

But livestock groups have often complained that little corn is left over for their operations because 40 percent of the nation’s corn is used for ethanol. Woodall said that shows the RFS can no longer be ignored. 

"I think what you're looking at is everyone is starting to realize that this is serious in nature, to make sure we don't have a government mandate that causes the demise of another industry," he said.

But getting the Environmental Protection Agency (EPA) to waive the RFS has proven difficult in the past. The RFS must be shown to cause severe or economic harm, and the biofuels industry says that only applies to refiners’ ability to meet the annual production quota. They maintain that will not be a problem this year.

Matt Hartwig, a spokesman with biofuels industry group the Renewable Fuels Association, referred to EPA’s refusal of an RFS waiver in 2008 as basis for resisting calls to suspend the rule. That year, Texas Gov. Rick Perry (R) requested a waiver from the RFS because he said meeting it caused severe economic harm.

EPA denied that petition, commenting the rule contributed to, but did not cause, those economic conditions. Shortly afterward, corn prices fell after rain buoyed crop yields.

But if the EPA won't take action alone, lawmakers have applied their own pressure on the agency to waive the RFS as a form of emergency drought relief. Agriculture’s estimates likely will breathe new life into Capitol Hill efforts to revise, end or waive the RFS.

Legislation exists in some form to undertake all of those options.

Bills in both chambers would also alter the RFS. Some would let states opt out of meeting the corn ethanol target; another pair of bills would let EPA revise the quota when corn supplies are low; and others would end the RFS altogether.