NCC Calls for Further Reduction of 2017 Ethanol Levels

(National Chicken Council) The National Chicken Council (NCC) strongly supports efforts to create a more reasonable and sustainable approach to the nation’s biofuel fuel policy, as the compelled diversion of corn from feed to fuel continues to exact a heavy toll on U.S. chicken producers, and American consumers at the pump and the plate.

“NCC believes the Environmental Protection Agency (EPA) is properly proposing to use its authority under the Clean Air Act to reduce ethanol blending requirements below the statutory levels,” said NCC President Mike Brown in comments submitted to the agency in response to their proposed renewable fuels volume requirements. “However, NCC believes the volumes proposed for 2017 are overly aggressive and based on faulty assumptions about the fuel market and thus should be further reduced to limit the disruptions to the corn market and nation’s feed supply.”

The EPA on May 18 proposed volume requirements under the Renewable Fuel Standard (RFS) that are lower than statutory targets for cellulosic biofuel, advanced biofuel and total renewable fuel, however they are increases from 2016 requirements. The Clean Air Act requires the EPA to set renewable fuel percentage standards each year, which the agency has consistently failed to meet since the RFS was implemented.

Brown wrote to EPA Administrator McCarthy that the use of corn for ethanol has created an uneven playing field for chicken producers. “In short, EPA’s proposal to set the 2017 implied conventional ethanol mandate above the blend wall reignites the food versus fuel inequity inherent in the structure of the RFS.” (As EPA notes, the e10 blend wall, “represents the volume of ethanol that can be consumed domestically if all gasoline contains 10 percent ethanol” and “marks the transition from relatively straightforward and easily achievable increases in ethanol consumption as e10 to those increases in ethanol consumption as e15 and e85 that are more challenging to achieve.”)

The impact of the food versus fuel pressure on feedstock has been severe. Since the RFS was enacted, chicken producers alone have faced $53 billion in higher actual feed costs due to the RFS. During the RFS era, at least a dozen chicken companies have ceased operations – filing for bankruptcy or having been acquired by another company.

“Given the unpredictable weather right now throughout the Corn Belt and the volatility in the corn market this past week, it is obvious that chicken producers are again only one supply shock, flood or drought away from high volatile corn prices as in 2009 and 2012,” Brown continued. “Where chicken producers have to adjust production and limit flocks due to corn prices, the RFS protects ethanol producers from having to make the same type of adjustments.”

Additionally, Brown pointed out that the rapid rise in ethanol exports in 2014 and 2015 is indeed a spillover effect that applies further pressure on the corn and feed market beyond Congressional intent under the RFS and is an urgent emerging resource constraint. For the four years of 2013 through 2016, ethanol exports will likely consume nearly 1.2 billion bushels of corn in addition to the corn consumed by domestic ethanol.

Congress, through Energy Independence and Security Act (EISA) of 2007, set the 15 billion gallon cap on corn ethanol under the RFS to prevent ethanol production from diverting too great a volume of corn from feed, food, and seed use to energy. At the time Congress set this cap, ethanol exports were not envisioned. While increased exports of ethanol put upward pressure on corn prices, they do nothing to improve domestic energy independence as is the stated goal of the EISA legislation.