After Texas Governor Rick Perry submitted a letter on April 25 to EPA requesting a waiver from the Renewable Fuels Standard in the 2007 Energy Bill, the fight was on.
Powerful livestock groups immediately are applauding Perry.
Crop associations and Texas' largest general farm organization denounce him.
The Texas Corn Producers Board along with the Corn Producers Association of Texas fired a joint statement right back to Gov. Perry the same day.
It noted: "In your letter, you stated that 30 to 35% of corn will be diverted to ethanol production in 2008. But you failed to mention the fact that the distillers grains accounts for one-third of the volume of corn, or the fact that all the protein in corn will still be available for livestock feed use through distillers grains, an ethanol byproduct. This byproduct is being used at dairies and feedlots in Texas today. So, the actual disappearance of corn is not represented by the 30-35 percent projection by the USDA."
The timing of Perry's waiver request was terrible. The corn organizations note that three ethanol plants already have opened manufacturing operations in Texas that are producing 340 million gallons of ethanol a year—and another 100 million-gallon plant will open soon during the second quarter of 2008. All of those Texas ethanol plants are located close to dairies and feedlots where distillers' grains will be readily available as livestock feed. The plants also will add to the economy in the rural areas by supplying much-needed jobs.
The groups say Perry's request helps perpetuate the myth that ethanol and corn is to blame for higher prices in grocery stores.
They note: "As Texas corn producers, we feel you are placing us under fire as you mislead officials and the public into believing that by granting a waiver Texas would receive much relief at the grocery stores."
Meanwhile, Texas Farm Bureau, the state's largest farm organization, expressed great dismay with Perry's waiver request.
"Governor Perry's claim that ethanol is the reason for rising food prices is misleading at best," says Kenneth Dierschke, TFB president, San Angelo. "A recent study by the Texas AgriLife Extension Service indicates a total waiver of the RFS would reduce corn prices by only 30 cents per bushel—a 5 to 8 percent decrease based on current prices."
Dierschke adds, "Other factors, including the declining value of the dollar and smaller world grain stocks, have far more impact on the price of corn."
"Gov. Perry needs to look no further than the skyrocketing energy costs to find where the true increases in food prices begin. Consumers are hit with a double whammy. Oil at more than $115 per barrel not only drives up fuel prices, but prices at the grocery story," he notes. "Distribution, manufacturing, and packaging costs—escalated by the price of oil—play a much bigger role in rising food costs than the price of corn."
"The Governor's decision to ask for a waiver shows lack of understanding of the issues as it relates to food prices," assures Omer Sagheer, vice president of marketing and public policy for White Energy Holding Company, LLC, who also has ethanol plants in the Texas Panhandle. "A reduction in the RFS will drive up fuel prices for consumers—not just here in Texas—but around the country."
Not surprisingly—powerful cattle groups applaud Perry
The Texas Cattle Feeders Association (TCFA) in Amarillo praises Perry.
"Texas Cattle Feeders Association appreciates the Governor's efforts to seek relief for consumers and livestock producers from inflated food and feed prices," says TCFA Chairman Walter E. Lasley. "We recognize that the federal government's ethanol policy is not the only thing driving up grain prices, but it is certainly a major factor. One need only to look at the price increases for corn since the federal government began its big push for ethanol to see the correlation: More corn being diverted to ethanol has meant much higher prices for livestock feed."
Lasley adds, "The cattle feeding industry is suffering, and we are thankful that Governor Perry is helping us bring this issue to the attention of federal policymakers."
The Texas and Southwestern Cattle Raisers Association (TSCRA) also strongly supports Perry. Jon Means, TCSRA president and a Van Horn, Texas cattle producer, says the beef industry can't be singled out to shoulder the burden of ethanol production unfairly. Means says there must be a level playing field.
Texas Commissioner of Agriculture Todd Staples also is aligning himself with Gov. Perry on the ethanol RFS issue.
"As Congress enacted the Renewable Fuels Standard mandate, they also purposefully and wisely included a waiver provision to account for critical times such as these," Staples says. "The impact of these unintended consequences is expanding our economic troubles from energy to food."
Staples adds, "Make no mistake, agriculture has a leading role to play in decreasing our nation's addiction to foreign oil, but we must have policies that ensure the sustainability of both our energy and food security in the long-term and short-term."
But the Texas corn organizations note the study just completed by the Agricultural & Food Policy Center at Texas A&M University showed a waiver would possibly have no impact on corn demand, price or use. Nevertheless, the groups fear that Perry's waiver request—just entering this discussion with EPA at such a critical time in the production year for U.S. farmers—could negatively impact the grain markets.
TFB President Dierschke says the Renewable Fuels Standard addresses America's growing energy needs.
"As a general farm organization, we represent livestock as well as crop interests in Texas," Dierschke notes. "We appreciate the recent stress of the marketplace on livestock feeding operations, while remaining mindful of decades of relatively low grain and commodity prices. Our organization respects the marketplace, and is confident the market will find a balance between feed use and fuel use of grain."
"Governor Perry's short-sighted decision is good news for our enemies who want to see the United States stay dependent on foreign oil," concludes Darol Lindloff, chief executive officer of Panda Ethanol. "As the governor of the nation's leading oil state he would rather send $1.3 billion a day overseas for the purchase of foreign oil, than use it here at home to help farmers pay for their ever-increasing production costs."
Lindloff says the governor's position is ill-informed and driven by special interest groups with no regard for the energy security of the nation.
"And as a waiver of the Renewable Fuels Standard will have little or no impact on the price of corn, it is evident that he is more concerned with political expediency than he is the facts."
Sorghum industry leaders also are disappointed.
"We are disappointed—yet not surprised—that the governor has chosen to ignore the true facts that are causing higher food prices at retail and press forward with a request to lower the Renewable Fuels Standard, which will affect our producers' bottom line in a negative manner," says Dan Krienke, a farmer in Ochiltree County and president of the Texas Grain Sorghum Association. "Likewise, we are equally disappointed that the (Texas) commissioner of agriculture concurred with the waiver request."
Scott Averhoff, chairman of the Texas Corn Producers Board, Lubbock, says American consumers—not just Texans—will suffer if Perry succeeds in getting a waiver of the Renewable Fuels Standards.
"We are concerned that a waiver of the TFS would have a negative impact on the cost of fuel in this state—and this country," Averhoff laments. "Transportation costs are a significant part of every dollar spent on food, and an increase in fuel will continue to drive up the cost of food. The general consumer will feel the strain on all consumer goods."
Averhoff notes the Texas A&M study does not support Gov. Perry. But it does show that the grain sector provides $2.7 billion to the Texas economy annually. In addition, the A&M study showed that corn prices have only affected the fed cattle-feeder steer price spread, whereas labor costs have largely affected all facets of livestock production in Texas.
David Ford, president of Corn Producers Association of Texas, Lubbock, says with diesel and gas prices already having more impact on food prices than the actual commodity in the food product, Perry's waiver could inadvertently increase food prices by more than it benefits them. He says it also could increase the overall transportation cost to all Texans by more rapidly increasing the price of fuel.