Higher corn prices, now above the cost of production, have ended the flow of farm subsidies to corn growers. Corn growers responded to profitable corn prices by attempting to expand production. Despite significant increases in planted acreage, drought has curtailed corn yields, sustaining higher corn prices. The livestock sector focused their ire on the ethanol industry despite much of the increase in the price of corn coming from other factors, such as higher energy costs. The livestock sector never complained about farm subsidies that compounded over production, sustained burdensome stocks and depressed corn prices, but found their consternation over government subsidies going to the ethanol industry.
That is a selective/hypocritical opposition to government subsidies. The livestock sector vehemently opposed the ethanol blender's credit, which has now expired. It is gone. They argue that the market should determine the fuel mix yet opposes E-15, which does just that - allowing consumers to pick their fuel blend.
That is just more of their hypocrisy. They oppose the RFS more out of spite than potential benefit. Blender's demand for ethanol as an oxygenate and octane booster supports ethanol demand.
Multiple studies have shown little initial impact on ethanol demand from reducing the RFS because Renewable Identification Numbers (RINS) already provide blender's the ability to comply with the RFS without making ethanol, which has allowed the industry to cut production 12 percent this year. It is the RFS that allows the market to work, the exact opposite of what the ethanol opposition contends. What the RFS does is protect the ethanol industry from predatory market practices of petroleum companies.
Ethanol could be selling for a nickel per gallon and they would not blend it because it displaces petroleum, which is the product they make. They could care less about things like U.S. foreign oil disparaging the energy diversity, or environmental benefits. They only care about market share, and every gallon of ethanol displaces oil. They don't care how much it costs U.S. taxpayers to fund the military to protect global oil transit routes or that they put U.S. servicemen in harm's way.
Every gallon of ethanol that we don't use comes at a great cost to U.S. taxpayers who, ironically, still fund oil subsidies, even though ethanol subsidies have gone away. That is tripling down on their hypocrisy. The livestock industry is coming after the RFS anyway because they know waiving it would expose the ethanol industry to the predatory practices of the petroleum industry, rooting for the petroleum industry to destroy the ethanol industry and restore their perceived birthright to cheap feed.
The livestock sector lies repeatedly, telling the media, which knows no different, that 40 percent of U.S. corn production was consumed for ethanol and that increased food prices. They lie by the omission that a third of every bushel of corn going through ethanol plants produces high quality distiller's grain.
Ethanol has had a very small impact on food prices. First of all, the cost of food only constitutes 14 percent of food prices and corn is but a small percent of that. The dog is too big to be wagged by such a small portion of corn in its tail. Ethanol reduces the cost of motor fuel per family, saving hundreds of dollars a year, far offsetting the impact on food prices. Consumers spend more of their disposable income for fuel per household than they do on food.
The ethanol industry has created more wealth in the Corn Belt states' economies than any other structural demand change in modern history, delivering great benefit to U.S. consumers and the country in general.
There wasn't a valid reason on a single line of the waiver requests from livestock states from the RFS. EPA politely went through the comment process and then denied the requests. The HSUS has put a target on the back of the livestock sector with a ground plan unfolding to dictate livestock production practices throughout the supply chain.
I have had to ask myself why I go to bat for the livestock industry when they have selfishly tried to stick a knife in the back of the Corn Belt economy. I do it because it is the right thing to do. The commercial livestock industry should do the same regarding ethanol.
David Kruse is president of CommStock Investments,Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet. CommStock Investments is a registered CTA, as well as an introducing brokerage.