In Washington, the governors of North Carolina, Arkansas, Maryland and Delaware made a formal request for a waiver of the Renewable Fuel Standard, in response to the 2012 US drought, which has caused a sharp fall in US corn crop estimates.
Yesterday, the RFA conducted a webinar on the topic which can be replayed here.
Analysis of the latest crop figures
Responding to the latest USDA crop estimates, Renewable Fuels Association Vice President for Research and Analysis Geoff Cooper, wrote:
“Today’s report estimates average yield at 123.4 bushels per acre (bpa), down nearly 23 bpa from USDA’s July estimate and the lowest yield since 1995. Harvested acres are pegged at 87.4 million, meaning a crop of 10.78 billion bushels (bbu) is expected. This is down more than 2 billion bushels from USDA’s July estimate and would be the smallest crop since 2006.
“As for demand, USDA projects significant rationing for all end users. Feed and residual use was dropped to 4.08 bbu, down 15% from the July estimate. Ethanol and co-products use was trimmed to 4.5 bbu, down 8% from July. This implies 12.6 billion gallons of ethanol production from Sep. 1, 2012 to Aug. 31, 2013, along with 35 million metric tons of animal feed. Notably, animal feed production by the ethanol industry would be the equivalent of 1.37 bbu of corn, based on USDA’s estimates, meaning total feed and residual use would be closer to 5.45 bbu and net use for fuel ethanol would be closer to 3.13 bbu. Exports were cut to 1.3 bbu, down 19% from July. Ending stocks were reduced to 650 million bushels, the lowest since 1995/96 and second-lowest since 1975/76. Season-average prices are pegged at $8.20/bu.
“Globally, total grain output (coarse grains, wheat, rice) was cut 2.9%, total grain supply was cut 2.1%, and grain ending stocks were reduced 4.3%. Still, 2012/13 global grain output would be the second largest on record, trailing only last year. Based on today’s USDA estimates, the U.S. ethanol industry will use 2.9% of the world grain supply on a net basis in 2012/13, the lowest percentage since 2008/09. While global grain ending stocks are projected lower in 2012/13 than in recent years, they are still estimated to be nearly 4% larger than the 10-year average.
Industry reaction to the waiver request
Renewable Fuels Association
“The RFS already includes a number of compliance options allowing great flexibility for oil refiners to meet their obligations under the program. The market is already taking advantage of these flexibilities as ethanol production has slowed 15% since the beginning of the year in response to market signals.
“To be clear, a waiver of the RFS will not provide the relief meat and livestock producers seek nor will it make it rain on dry corn fields and pastures. What waiving the RFS would do is send chilling signals to investors in new biofuel technologies, threaten to force gas prices higher than they already are, and dramatically lower the availability of ethanol feed products on which the livestock industry is growing to rely.
“We look forward to once again demonstrating that the efforts of those in the livestock, meat, food processing, and petroleum industries to end domestic ethanol production would do more harm than good to America’s economy and its energy security than a return to $2 per bushel corn prices and an increasing reliance on imported oil.”
Earlier today, the RFA held an in-depth webinar detailing the fallacies behind requesting a waiver. That webinar can be replayed here.
Tom Buis, CEO of Growth Energy
“The marketplace always has worked and always will work in rationing demand for commodities that are in short supply. Already, market forces have taken effect – the production of ethanol has declined by 15 percent and corn prices have already dropped .36 cents from last week.
“Furthermore, the governors continue to use misinformation saying that corn ethanol uses 40 percent of the corn crop – we do not. In fact, only 16 percent of the corn acres harvested goes to ethanol production. Just one-third of the kernel is used for ethanol, with all the protein, fiber and oil being returned to the food chain in the form of a high protein animal feed, which replaces corn and soybean meal and is less expensive.
“I have full faith that the Environmental Protection Agency’s review of this petition will conclude the facts – any economic harm that may result is due to the drought, not ethanol production.”
Brian Jennings , Executive Director, American Coalition for Ethanol
“We welcome a fact-based examination of the role the RFS plays in moderating gas prices and reducing expensive foreign oil imports. While we cannot compete with our opponents’ well-funded public relations attacks on the RFS, we are absolutely certain that an examination of the facts by EPA, the Department of Agriculture, and Department of Energy will confirm the role the RFS plays in reducing gas prices, and as a result, confident they won’t waive the RFS.”
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