US still short of rational ethanol policy

Reducing overall mandates for corn-ethanol and adopting flexible mandates would be a good start to a more rational policy.

A political deal is afoot in Washington to end federal tax credits to fuel blenders of ethanol. But there is no end in sight to the most important government support for ethanol – the federal mandate that gasoline blenders mix increasing amounts of ethanol into gasoline. That means the U.S. is still nowhere close to a rational biofuels policy with 40% of corn production going to ethanol production.

Poultry producers paying attention to the recent G20 agricultural ministers meeting saw fleeting support from an unusual source in their opposition to corn-ethanol mandates. French President Nicolas Sarkozy proposed that the governments of the world’s wealthiest nations end biofuel subsidies and mandates because of their role in raising food prices, but the U.S. and Brazilian delegations blocked the proposal. Sadly, U.S. poultry producers can expect more support from the president of France on an issue critical to their economic survival than from the U.S. Secretary of Agriculture.

Sarkozy is currently president of the G20 group which commissioned a report that, among other things, called for a reduction in the use of biofuels. Instead, the ag ministers meeting in Paris merely called for further analysis of the impact of biofuels on food availability and prices.

USDA’s all-and-nothing approach  

Another proposal rejected at the Paris meeting reflects the USDA’s all-and-nothing approach to biofuels policy. (That’s granting all consideration for the position of corn-ethanol production and nothing for food production.) It was a proposal to study the feasibility of flexible mandates, which would link the production of biofuels such as ethanol to the price of the commodity. The proposal was dropped after strong lobbying from the U.S. and Brazilian delegations.

Poultry production is part of U.S. agriculture, too  

U.S. Agriculture Secretary Tom Vilsack’s allegiance to corn-ethanol was also on display at a luncheon in Washington ahead of the ag ministers meeting in Paris. In Washington, the Secretary delivered his oft-repeated position that biofuel production plays only a minor role in higher corn and food prices. Vilsack defended the ethanol industry, saying “corn-based ethanol does not deserve the scapegoat reputation that some folks attempt to assign to it.” From the perspective of poultry producers, this is blind allegiance that is driving their companies into bankruptcy.

Poultry producers witness the Secretary continually rising to the defense of the ethanol industry and the interests of corn growers but ignoring poultry’s economic plight. Their message might justifiably be as follows: Mr. Secretary, poultry production is part of U.S. agriculture, too. More balance in policy is needed in the nation’s requirements for fuel and food.

More balance in markets needed  

Unlike some sectors of agriculture, poultry producers don’t ask for subsidies or price supports. Their survival does depend on feedstuffs, including corn, being affordably available, as far as weather and other market factors allow. Ironically, this requirement is missing due to the level of government mandates for the use of corn in ethanol production.

If U.S. agriculture is to play its necessary role in feeding a world population of 7 to 9 billion by 2050, more balance is needed in U.S. biofuels and food policy. The current administration has made much of small-scale agriculture and specialty crops, but the efficient U.S. poultry industry has a role to play in meeting the world’s large-scale needs for affordable protein. Successfully meeting these needs will require all sectors of agriculture – including corn producers and poultry producers.

Greater balance in U.S. policies involving food and fuel production not only is in the interest of the nation but is crucial to the survival of the meat and poultry industries. Reducing overall mandates for corn-ethanol and adopting flexible mandates would be a good start to a more balanced and rational policy.