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COALITION WANTS RENEWABLE FUELS STANDARD REFORM

Zoom in font  Zoom out font Published: 2012-07-23  Views: 47
Core Tip: In response to a new economic study on the impact of corn ethanol production on food prices and commodity price volatility, a coalition of livestock and poultry groups is asking Congress to reform the federal Renewable Fuels Standard (RFS) that mandates t
In response to a new economic study on the impact of corn ethanol production on food prices and commodity price volatility, a coalition of livestock and poultry groups is asking Congress to reform the federal Renewable Fuels Standard (RFS) that mandates the amount of ethanol that must be produced annually.

The study, conducted by Thomas Elam, Ph.D., president of FarmEcon LLC, an agricultural and food industry consulting firm, found federal ethanol policy has increased and destabilized corn, soybean and wheat prices to the detriment of food and fuel producers and consumers.

The RFS, first imposed in 2005 and revised in 2007, this year requires 15.2 billion gallons of ethanol to be produced. Most of that amount is blended into gasoline at 10%.

“The increases we’ve seen in commodity prices are strongly associated with the RFS mandate,"  Elam said. “At the same time, we haven’t seen the promised benefits on oil imports or gasoline prices. This means that while Americans are forced to pay more for food, they’re also not seeing lower prices at the pump; it’s a lose-lose situation."

As a Senate Biofuels Investment and Renewable Fuels Standard Market Congressional Study Group examines several aspects of the RFS, the study will provide critical facts needed to reform the current standard.

In urging reform of the RFS, the coalition cited the Elam study’s conclusion that the mandate should be revised to allow automatic adjustments to reduce incentives for ethanol production when corn stocks are forecast to reach critically low levels.

The coalition supports the “Renewable Fuels Standard Flexibility Act" (HR 3097), sponsored by Reps. Bob Goodlatte (R-Va.) and Jim Costa (D-Calif.) that  would require a biannual review of ending corn stocks relative to their total use. If the ratio falls below 10%, the RFS could be reduced by 10%. If it falls below 7.5%, the mandate could shrink by 15%; below 6%, it could be reduced by 25%; and if the ratio falls below 5%, the ethanol mandate could be cut by 50%.

 
 
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