How the EPA Can Stop Food Inflation from Getting Worse
A recent Environmental Protection Agency (EPA) proposed update to the Renewable Fuel Standard (RFS) will hurt America’s food supply chain and raise prices even higher for consumers.
In the proposal, the EPA recommends a sharp increase in mandated volume levels for advanced biodiesel, a biofuel which relies heavily on the same commodity used by virtually every human and pet food company in the U.S.: soybean oil.
If the proposal is finalized as-is, there will simply not be enough soybean oil to go around. Over the past year, and well before EPA issued its proposal, the competition for soybean oil between biodiesel refiners and food makers has been fierce, with food producers often outbid and cut off from supply for this ingredient. Small and medium-sized food companies have been especially hard hit. If the agency’s plan isn’t changed, food makers, food retailers and foodservice entities that rely on their products could be completely out of luck.
The result? Fewer products on grocery shelves, in restaurants and in kitchens across America. Federal feeding programs, food pantries and hunger groups would face even more overwhelming challenges. It’s entirely within the realm of possibility that consumer prices for staples could be exorbitantly expensive, as in two to three times today’s prices.
Moreover, Americans are likely to see sparsely stocked bread, cracker, snack, sauce and frozen food shelves and even more “out of stock” signs at restaurants. Soybean oil is simply irreplaceable in the food supply chain as it exists today.
America’s hardworking farmers have seen their best soybean crop yields in years, but the demand for soybean oil – driven in part by the steadily increasing RFS mandate – has far exceeded domestic soybean oil refining capacity. Already, nearly half of all U.S. soybean oil goes toward biofuel production, and this proportion is only expected to grow. The U.S. Department of Agriculture projects the quantity of soybean oil used to make biofuels will increase 25 percent over the next year.
Biodiesel refiners are building new refining capacity, but it will take years for these new facilities to come online. In the meantime, biodiesel refiners must follow the dictates of the EPA’s RFS and produce a mandated level of biofuel, even if it means no soybean oil is available for food, which is exactly what’s happening.
As a result, food makers have been forced to import foreign soybean oil, which is more costly due to heavy tariffs at 19.1 percent. The U.S. was long able to meet our domestic soybean oil needs, but unfortunately and alarmingly, became a net importer of soybean oil in September and October of 2021.
For many months now, those in the food industry have sounded the alarm to government officials about the critical supply shortage of soybean oil. When the EPA seemingly ignored ag organizations’ pleas and proceeded to issue an RFS advanced biofuel category mandate that represents a nearly 13 percent jump for 2022 over 2021, many were shocked.
Under the RFS statute, EPA is obligated to consider current market realities when setting the mandate levels each year.
America’s fragile food supply chain has endured blow after blow during the pandemic. Government might not be able to control every aspect of food price inflation, but when it comes to the market for soybean oil, this is one area where government action can help.
The EPA should acknowledge the soybean oil supply crisis and temporarily lower the RFS mandate for advanced biofuel to allow supply to catch up with demand. Otherwise, the soybean oil supply crisis will escalate, and consumers will pay the price.
This opinion was a joint effort with input from the American Bakers Association, Association for Dressings and Sauces, Consumer Brands Association, National Council of Chain Restaurants, National Retail Federation, Pet Food Institute and SNAC International and was originally published on agri-pulse.com.