Congress should reconsider ethanol blend rate

  • Article by: JOHN BURKEL and MIKE HELGESON
  • Updated: August 16, 2013 - 11:04 AM

The Renewable Fuel Standard that mandates the rate has been causing more harm than good, so Congress is right to act.

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Congress passed the Renewable Fuel Standard in 2005 to ease our country’s reliance on foreign oil. Blending a mandated amount of ethanol (which, in the United States, is mainly made from corn) into gasoline to help achieve this seemed like a good idea at the time. The percent of ethanol mandated by the RFS, referred to as “blend rate,” was determined on the basis of how much the demand for gasoline was expected to rise in coming years. The RFS contained a safeguard in the event of hardships, but it doesn’t recognize all dire circumstances as hardships. Last summer’s drought, which reduced the U.S. corn crop by one-third, is the best recent example of this discrepancy.

Fast-forward to 2013. Because of better-than-expected fuel economy and sluggish economic growth, the demand for gasoline has not increased as expected. As a result, Congress is reevaluating the mandated ethanol blend rate. This is the right thing to do. The negative consequences of the RFS have been unintentional. But knowing that we can fix something that’s flawed yet not doing so would be a much worse fate.

The ethanol requirement created an aggressive boom in that industry over recent years. What many don’t know is that, at the same time, other industries were seriously hurt. Minnesota, for instance, is the No. 1 turkey state in the nation and is home to chicken and egg producers. These industries rely on good Minnesota corn for animal feed — more than 50 percent of birds’ diets, to be exact. With an astounding 40 percent of the U.S. corn crop going into our gas tanks instead of toward animal feed, industries are bound to be at odds. To add fuel to the fire, over the past few years, more than a dozen poultry companies claimed bankruptcy, were sold (some to foreign competitors), or closed their doors.

Why? Since the RFS was fully implemented in 2007, average annual feed costs have skyrocketed by $8.8 billion for chicken producers and by $1.9 billion for turkey. Cumulative additional costs for broilers (chickens raised for meat) and turkeys since 2006 have totaled more than $50 billion. All while corn continues to be used to fill our gas tanks. Is this really worth the price of thousands of workers being laid off and hundreds of family farms left without contracts? What’s more important — food or fuel? And not just for animals — we’re talking about how increased feed costs result in higher food prices for all of us.

And this hits home. Our money doesn’t stretch nearly as far as it used to at the supermarket. This is because consumers have recently shared in record-high prices: 35 percent more for chicken and 52 percent more for turkey over the seven years. No, the timing is not coincidental. Those prices have significantly increased since the Renewable Fuel Standard was implemented in 2007. In 2012 alone, the average family of four saw an increase of approximately $2,000 in yearly food costs. Since 2005, the consumer price index for all food rose nearly 25 percent, compared with a 16 percent increase in core inflation during the same time. It’s devastating when you consider that the number of Americans saving for retirement continues to drop.

We’d be neglectful if we didn’t mention the RFS mandate’s negative impact on prices for other food items that contain corn, corn-based products, or other grains. Whether you eat an omelet, cereal, or waffles with syrup for breakfast, you’re now paying more for those products. The increased demand for corn has edged out land used to grow other food and grain crops like soybeans and wheat. In fact, prices for those crops have increased a stunning 24 percent since 2008, which is three times the increase in energy costs over that same time.

Already challenged in some years by Mother Nature, let’s control what we can. We hope that you’ll join us in standing up for freedom, affordability and choice in our nation’s food supply through a practical approach. Together, we can help build a better tomorrow for the millions of Americans who rely on our food system for safe, wholesome, reasonably priced food items for their families.

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John Burkel is a turkey grower from Badger, Minn., and on the board of directors for Northern Pride Inc. Mike Helgeson is CEO of GNP Company, a chicken producer in St. Cloud.

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