U.S. Biofuels Policies Hurt Livestock Sector, Say Analysts
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Two US analysts made a case against the U.S. biofuels policy at the 2010 Banff Pork Seminar, saying that the policy will wreak havoc on corn, oil, North America’s livestock sector, and everything in between.
Steve Meyer and Ken Grier has nothing good to say about the impact of the U.S. biofuels policy on North America’s pork industry – an issue they feel is the “elephant in the room” as far as the livestock business is concerned.
Image: Michelle Meiklejohn / FreeDigitalPhotos.net
On the topic of the U.S. blenders’ tax credit, and the import tariff on ethanol, the speakers said that these subsidies, which protect the U.S. ethanol business, will expire at the end of the year. But with or without it, they say, it doesn’t impact how much ethanol is being created in the U.S., and doesn’t impact the price of corn or ethanol.
The Renewable Fuels Standard (RFS), they say, ignores whether or not the production of ethanol makes any sense, it pushes production regardless.
“That means 15.5 billion gallons of corn-based ethanol in 2015. The number for this year is 12 billion gallons. There are 193 plants currently operating. There are another 13 still being built or expanded. We can’t un-ring that bell. Those plants will be operating.”
These factors, they say, impact the prices of corn. “The relationship between corn price and oil price is a strong one. My observation so far is that anytime oil is over $70 a barrel this positive relationship is far stronger.”
Corn prices could go as high as $4, and even if contributing factors like the blenders’ tax credit were removed, prices would only be lowered by about .50 cents.
So what do they suggest?
“One thing we do need is an automatic trigger of some sort for the scenario where we get a drought and especially if oil prices are low,” says the duo. “We can turn off ethanol plants relatively quickly. It’s pretty hard to turn off the livestock sector. We could end up with $7 or $8 dollar corn and if oil is $50 dollars or even $70 a barrel, that scenario says burn gasoline in your car for a year and feed that corn to the livestock but our policy says ‘Thou shalt use the grain to make ethanol’. I think we need something to set that aside.”
