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Gov. Perry: Ethanol Mandate Harms Livestock, Food Industries

Press Release

Location: Washington, DC

Gov. Perry: Ethanol Mandate Harms Livestock, Food Industries

Industry Leaders Join in Urging EPA for 50 Percent Waiver for Grain-based Ethanol

Gov. Rick Perry, joined by industry leaders across the country, today urged the U.S. Environmental Protection Agency (EPA) to grant a 50 percent waiver from its Renewable Fuel Standards (RFS) mandate for grain-based ethanol. Upon Gov. Perry's initial waiver request in late April, the EPA granted a comment period to consider the appeal, which ended yesterday. A decision on the request is expected later this summer.

"While I have no doubt this mandate was a well-intentioned effort to move our country toward energy independence, it is doing more harm than good and must be modified before our livestock industry suffers permanent damage," said Gov. Perry. "Granting this waiver will provide much needed relief to families, while enabling Texas to continue feeding and fueling the nation."

Gov. Perry was joined by National Cattleman's Beef Association Economist Gregg Doud, National Chicken Council Senior Vice President and Chief Economist Bill Roenigk, and Capitol Land & Livestock President and CEO Jim Schwertner to reiterate the necessity for relief from skyrocketing corn prices, caused primarily by the RFS mandate. Also in attendance in support of the waiver were: Campbell Soup Company, Tyson Foods, American Meat Institute, National Turkey Federation, American Bakers Association, Dean Foods, National Pork Producers Council, Grocery Manufacturers Association, Hispanic Institute, American Beverage Association, National Restaurant Association, American Conservative Union, Kraft Foods and Pepsi Co.

Since the vast majority of livestock feed products are corn-based, the artificial pressure created by the mandate threatens irreparable damage to livestock operations across the country. In Texas, this industry accounts for roughly $75 billion of the state's economy. As America's largest beef-producer and one of the top 10 states in poultry/egg and dairy production, the state plays a significant role in feeding and fueling the nation. Texas cattle feeders haven't seen profits since June 2007 and small family ranches, which make up two-thirds of Texas cattle producers, face potential bankruptcy.

"The federal ethanol policy is causing a crisis in our industry," said Jim Schwertner, President and CEO of Capitol Land & Livestock, who has spent his life in the cattle business. "Corn is a staple product for feeding livestock, and its rising cost is taking a toll on the entire industry."

Texas, along with the rest of the country, cannot afford this economic strain any longer. A partial waiver of the grain-based ethanol mandate is the most efficient way to halt the economic damage instigated by the rising cost of corn and offer relief to the family businesses that are an integral part of our state and nation's food supply.

In the last three years, corn prices have risen 233 percent globally and international food prices have increased 83 percent. Since Gov. Perry's request for the RFS waiver, the price of corn further increased from $5/bushel to now more than $7/bushel. Corn prices are expected to rise even higher, given the ethanol mandate and recent floods in the Midwest.

Increased corn costs have not only negatively impacted the livestock industry, but ethanol producers as well. Escalating prices have eroded the profit margins of ethanol producers and threaten gasoline blenders to choose between bankruptcy or noncompliance, a dilemma Congress could not possibly have intended to impose when it doubled the RFS mandate in Dec. 2007.

In 2007, 25 percent of the U.S. corn crop was diverted to produce ethanol, according to the U.S. Department of Agriculture, which projects that 30 to 35 percent will be diverted in 2008. With ever increasing mandates of corn crop diversion to ethanol production through 2015, the impact on food prices globally, and to Texas specifically will only worsen.

The RFS mandate was established by the federal government through the Energy Policy Act of 2005. It was amended in 2007 by the Energy Independence and Security Act, which increased the RFS mandate, requiring 9 billion gallons of grain-derived ethanol be blended into our nations fuel supply in 2008, almost twice the amount from 2007. While well intentioned, the RFS mandates the levels of renewable fuel usage regardless of market signals. The artificial demand for grain-derived ethanol is devastating the livestock industry in Texas while contributing to higher food prices around the world.

Please click here to view Gov. Perry's comment to the EPA requesting a 50 percent waiver of the Renewable Fuel Standard for grain-based ethanol

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