Livestock producers and their representatives in government are pressuring officials to suspend the federal mandate that ethanol be mixed into gasoline, although the Obama administration hasn’t indicated any inclination do to so.
The drought across the Midwest has pushed corn prices over $8 a bushel and driven up costs for the country’s beef, pork and poultry industries. Demand for corn remains strong domestically and internationally, despite reluctance to buy at high prices.
On Tuesday, the governors of North Carolina and Arkansas sent letters to officially petition the U.S. Environmental Protection Agency to grant a waiver from the ethanol quotas mandated by the federal Renewable Fuels Standard. Under that mandate, gasoline must include a specified minimum amount of ethanol, which is typically made with corn in the U.S.
The governors of Maryland and Delaware have already sent letters, as have 26 U.S. senators and 156 members of the U.S. House, along with trade groups representing the livestock and poultry industries.
President Obama hasn’t indicated whether he would support a suspension. Obama has maintained that ethanol is a strong driver of the rural economy because it supports corn prices. He also recently unveiled several measures that he said would help farmers combat effects of the drought.
The ethanol industry and its supporters have said a suspension isn’t necessary. Ethanol production has already fallen 15 percent this year because of falling gasoline consumption and higher corn prices, according to Poet Ethanol, the country’s largest ethanol producer.
Waiving the mandate now would only lower corn prices by about 5 percent, and it would cause long-term uncertainty in grain markets and raise the purchases of foreign oil, said Poet CEO Jeff Lautt.
U.S. Rep. Mike Pompeo, R-Wichita, said he didn’t sign the House letter asking the EPA to suspend the mandate, although he strongly opposes government mandates and subsidies.
Energy markets are complex, he said, and turning government mandates on and off and on again would roil the markets and hurt market participants.
What makes this debate different from most in Congress, Pompeo said, is that it doesn’t fall along the usual partisan lines. Many supporters of the mandate are farm state Republicans.
“It’s not an intensely political debate,” he said. “It’s people trying to figure out the right solution for farm country.”
Sen. Pat Roberts, R-Kansas, ranking member of the Senate Committee on Agriculture, Nutrition and Forestry, took a cautious tack, saying that this isn’t a decision that should be made because of mounting pressure.
“The decision on whether or not to grant the waiver should be made by technical experts evaluating market conditions … not politicians,” he wrote in an emailed statement Wednesday.