Ethanol Quota Debated by Corn Farmers and Meat Industry

The following is an excerpt from an article in 

The New York Times
Friday, August 17, 2012

Ethanol Quota Debated by Corn Farmers and Meat Industry

By JOHN H. CUSHMAN Jr.

WASHINGTON — Three big intertwined but rival agribusinesses — corn farmers, meat and poultry producers, and biofuel refineries — are in a political fight to protect their interests as a drought ravages corn producers and industrial consumers alike.

At issue is whether to suspend a five-year-old federal mandate requiring more ethanol in gasoline each year, a policy that has diverted almost half of the domestic corn supply from animal feedlots to ethanol refineries, driven up corn prices and plantings and created a desperate competition for corn as drought grips the nation’s farm belt.

Meat producers are demanding that the Obama administration waive the ethanol quota to ease rising feed prices. But ethanol producers worry that the loss of the quota will undermine the ethanol industry and do little for corn farmers but drive down the price of their stunted harvest.

The meat industry, backed by several governors, lawmakers and even international food agencies, argues that the quota has distorted grain markets by sucking up corn when ranchers can least afford it.

But the ethanol industry says that its corn consumption is down 12 percent since the start of the summer and that weekly ethanol production is at a two-year low. As corn prices have risen, refineries have scaled back production, idled dozens of plants and sold ethanol inventories. As a result, the industry may consume 10 percent less of this summer’s crop than last year’s, government and industry officials said.

“The market is already responding to the reality of this drought,” said Agriculture Secretary Tom Vilsack, a former Iowa governor who supports the quota, citing the recent decline in ethanol production.

Meat and poultry producers countered that the government was still “picking winners and losers,” and urged the Obama administration to “let the market work and embrace free market principles,” as J. D. Alexander, president of the National Cattlemen’s Beef Association, put it when he announced a petition to waive the quota two weeks ago.

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