By Tracy Turner, Ohio State Extension/Ag Answers
With USDA’s forecast that corn production this year will drop 13% to a six-year low as a result of the historic drought nationwide, the calls to divert more corn for food versus fuel are likely to grow more urgent, Ohio State University Extension economist Matt Roberts says.
In its monthly crops report, USDA last week cut its projected U.S. corn production to 10.8 billion bushels, down 17% from its forecast last month of nearly 13 billion bushels and 13% lower than last year. The projected corn production would be the lowest since 2006, meaning there will be intense competition for the reduced crops.
The USDA said it expects corn growers to average 123.4 bushels per acre, down 24 bushels from last year. In Ohio, those numbers translate into a projected 126 bushels per acre, which is down 32 bushels per acre from last year for corn.
For livestock producers already suffering because of poor pasture conditions and high hay costs from the historic drought, that means higher feed costs and the potential that more of them will be forced to sell their herds because they can't afford to feed them, Roberts said.
This is prompting increased calls to divert less corn this year to ethanol by easing the U.S. ethanol mandate, he said. Under the Renewable Fuels Standard, U.S. fuel companies are required to blend 13.2 billion gallons of ethanol into gasoline in 2013, or about 10% of total gasoline usage, which requires converting some 40% of the U.S. corn crop into the biofuel.
"There is more and more pressure for the ethanol mandate to be reduced for the current year to increase the availability of corn for livestock feeding," Roberts said. "Given the yield forecast, coupled with this extreme reduction in feed demand, it will strengthen the case for an ethanol standards waiver.
"These calls began as a trickle for a temporary waiver of the ethanol standard, but the calls have since grown stronger."
In fact, Roberts said, 25 U.S. senators sent a letter earlier this month to the Environmental Protection Agency urging the agency to use its waiver authority to adjust the country's ethanol mandate because of the negative impact on corn prices caused by the drought, which is the most severe in the country in 56 years.
As it stands now, ethanol will be produced from 38% of this year's crop, down from 41% last year, according to government estimates.
But the EPA could waive the renewable fuel standard if it causes an extreme disruption in the input markets or if the fuel is unavailable.
"Many people are calling for the waiver on the grounds that the mandate is causing extreme disruption, but many in the ethanol and renewable fuels industry don't want to see the waiver granted because they see it as a slippery slope for future repeal of the renewable fuel standard," Roberts said.