Signing separate letters Tuesday, Arkansas Governor Mike Beebe and North Carolina Governor Beverly Perdue petitioned the U.S. Environmental Protection Agency to waive the Renewable Fuels Standard, which mandates ethanol production quotas.
Governor Perdue cited the drought's effects on the corn supply for increasing commodity prices.
Perdue said the RFS has "imposed severe economic harm to my state's swine, poultry, dairy, and cattle producing regions." She added that direct harm is "caused by the RFS requirement to utilize ever-increasing amounts of corn and soybeans for transportation fuel. Whatever the final damage done by the severe lack of rainfall, it is clear that this harm is reflected in accelerated prices for corn and soybeans, which have a severe economic impact on the state of North Carolina, various regions within the state, and important economic sectors within the state."
Governor Beebe also pointed a finger at the RFS for increasing feed prices.
"While the drought may have triggered the price spike in corn, an underlying cause is the federal policy mandating ever-increasing amounts of corn for fuel," Beebe said. "The higher feed costs following the passage of RFS1 in 2005 and RFS2 in 2007 have resulted in a long-term shortage of grain in our nation, especially corn, and are clearly taking a terrible toll on Arkansas' poultry and animal agriculture, potentially forcing reduced production and job losses and increasing food prices for consumers worldwide."
Following the governors' letters, Tom Buis, CEO of Growth Energy, called the waiver requests unnecessary and based on misinformation. He said the market will do the work needed to control commodity prices.
"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," he said.
Also in his statement, Buis stood by ethanol's share of the corn crop.
"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.