More ethanol in gasoline will mean higher meat, feed prices in the US

 

 

More corn will be used to produce ethanol if the government allows more ethanol in gasoline, pushing corn prices up for livestock feed and eventually translating into higher meat prices for consumers, according to a couple of studies funded by food industry and other groups.

 

The alliance Food Before Fuel, with members like the American Meat Institute, American Bakers' Association and the Grocery Manufacturers Association, is adamantly against the ethanol industry's petition to the Environmental Protection Agency to allow more ethanol into gasoline.

 

One of the reports, produced by Advanced Economic Solutions for Food Before Fuel, concluded that if ethanol production expands, the industry could end up using about half of the US corn crop "at the expense of other uses - including animal feed and exports."

 

About a third of the US corn crop will go toward producing ethanol this year, according to the latest US Department of Agriculture forecast.

 

Bill Lapp, president of Advanced Economic Solutions, said that if the EPA agrees to the petition and allows the cap on ethanol in gasoline to rise to 15 percent of a gallon - up from 10 percent now - the amount of land planted with corn could rise to 111 million acres at the expense of other crops.

 

Farmers are expected to plant 85 million acres of corn this year, according to USDA.

 

Tom Elam, president of FarmEcon LLC and author of another report released by the Food Before Fuel alliance, said livestock producers have suffered severely since corn prices rose substantially in 2007 and he blamed ethanol producers.

 

"Expanding the use of corn for ethanol production in 2010 and beyond will only make this problem worse," Elam said.

 

Seed producers and farm groups have promised rising yields in the future, Elam said, but that won't come quick enough if the EPA allows gasoline to become a 15 percent ethanol blend.

 

A blend increase, though, is seen by some as necessary for the ethanol industry to meet a government production mandate of 15 billion gallons yearly by 2015.

 

The most that ethanol companies can produce under the current 10 percent cap, called the "blend wall," is 12 billion to 13 billion gallons, according to Rick Tolman, chief executive of the National Corn Growers Association.

 

And the demand increase expected with a blend increase is what's needed to get idled ethanol production facilities back into operation, Tolman said in a recent interview.