EPA’s Proposed Rule to Reduce the Renewable Fuel Standard
I am glad to be back visiting in Washington, D.C. It is an honor for me to testify on behalf of National Cattlemen’s Beef Association(NCBA) before EPA regarding the proposed rule to reduce the 2014 renewable volume obligations under the Renewable Fuel Standard (RFS).
The Renewable Fuels Standard has been a topic of interest in the beef industry since Congress passed the legislation in 2005 and then greatly expanded the mandate in 2007. Our industry supports renewable energy including ethanol, but the government policies passed by Congress and enforced by the EPA have created significant challenges for the livestock sector that also depends on corn to feed our animals.
NCBA strongly supports EPA’s proposed rule to reduce the 2014 renewable volume obligations for conventional ethanol by 1.39 billion gallons. The proposal is focused on the energy side of this debate rather than the feed side – but these actions will have a direct impact on our industry that also utilizes corn. During the 2002-03 marketing year, USDA estimated that corn use for ethanol production accounted for 10 percent of the total U.S. corn usage. Today, because of the government policies in place, roughly 42 percent of the corn crop is utilized by one user of corn – the ethanol industry. From 2002-13 the use of corn for feed has fallen from about 58 percent to about 37 percent.
Even though the cattle industry is able to utilize the byproducts created from the ethanol production process, their efficiency as a replacement of corn is not comparable, considering only 17 pounds of distiller’s grains can be produced from a bushel of corn. Even in corn and ethanol country, we have challenges with the nutritional consistency of the dried distiller’s grains (DDGs) that we feed our animals.
The U.S. cattle industry has realized a significant economic impact due to the RFS mandate and the historic drought that impacted more than 70 percent of the U.S. last year. From 2007-10, the cattle-feeding sector of our industry lost a record $7 billion in equity due to high feed costs and economic factors that negatively affected beef demand. This type of loss is not sustainable for a segment of our industry that relies on corn, and as a result of the continued diversion of corn to satisfy the mandatory RFS, it is likely these losses will continue.
Over the past four years the average cost of gain to finish a beef animal in a feedyard has increased by more than $200 per head as a direct result of increased feed costs. These costs are not able to be passed along to the consumer and are absorbed by me and my fellow cattle producers. This trend is not sustainable and our government policies need to be evaluated in a manner that considers the economic impacts on all users of corn, not just the ethanol industry. The single biggest challenge for all of agriculture is Mother Nature, and even though the corn crop is expected to be a “bumper” crop this year, it is a stark difference from where we sat just one year ago during the historic drought and leaves uncertainty with future weather patterns.
EPA’s proposal acknowledges that the current policy needs to be re-evaluated. This is a great step in the right direction, and we hope EPA will work to retain the lower projections and work with Congress to consider long-term reforms that take into account the world we live in today and all sectors that use corn. Since the RFS’ enactment more than eight years ago, many factors have changed, and it’s important for our government policies to reflect the changes as they evolve.
At one time there was a need for government policies to help the ethanol industry find their feet. Today, we have a mature and sophisticated industry before us, and after many years of federal support, it’s time to compete on a level playing field with everyone else. Artificially diverting more of the corn crop to ethanol production is bad public policy.
In September, the Renewable Fuels Association encouraged the cattle industry to look at the flexibility of the RFS policy on the regulatory side of this debate. This is a step in the right direction as the policies in place are outdated, and on behalf of NCBA, we will continue to work with Congress to reform the RFS to allow all users of corn to compete on a level playing field.