EPA Proposes Lower RFS

Many feel it’s a day late and a dollar short—the issue should have been addressed a year ago with a considerably reduced corn crop due to drought, and $7 corn…but last week the Environmental Protection Agency proposed a lower Renewable Fuel Standard requirement for next year.

American Farm Bureau Economist Matt Erickson says the proposal is a disappointing step backward…

“If you look at the Renewable Fuels Standard, its really a success story. We have seen oil imports decrease from 60% to 40%. Even with the economic down turn, we have seen tens of thousands of good paying jobs in an industry that supports our overall energy policy. We are moving away from relying on a foreign energy source.”
 

While all of that is true, it’s come at a cost…higher protein prices in the meat case for consumers due to the higher cost of corn to feed livestock.

Scott Prestige, Vice President of the Turkey Division for North Carolina’s Prestige Farms has a different point of view on the RFS:
 

“We are happy to see this day come. We have always felt that our industry was at a competitive disadvantage – and competing with the energy industry when you look at how the whole corn/ethanol process has worked. We are happy that EPA is backing up and believe that it will have a positive impact on the cost of our finished products as we go through 2014.”

The EPA proposal calls for 16-percent less renewable fuels usage than the 2007 law. Erickson admits the energy situation has changed since that law was written…
 

“The US was forecasted to consume over 150 billion gallons of gas. Because we had the ’08-09 recession, and we have higher mileage requirements in our vehicles, times have changed. The energy situation has changed. The whole purpose of RFS is to put more renewable fuel into the market place. Even though the expectation for gas consumption has decreased.”

Also, when the 2007 Renewable Fuels Standard was written, corn-based ethanol was the only viable renewable fuel, and the thought was that second and third generation cellulosic products were just around the corner. That hasn’t happened, so the standard has continued to increase annually without a commercially viable alternative to corn-based fuel.

Prestige explains that with hogs and turkeys both, it’s been difficult for the business to be profitable:
 

“It has impacted both of our businesses, hogs and turkeys. Its just that in the turkey business we do tend to see profitability during those years when our feed cost are low. That’s the nature of the turkey business. On the hog side, we are able to maintain profitability easier as feed prices escalate, assuming demand is strong.”

The proposal is open for a 60-day comment period where it would be a safe bet the proposed reduction will be hotly debated.
 


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