RFA defends ethanol in wake of USDA reports

Washington-The Renewable Fuels Association (RFA) on March 31 weighed in on the USDA’s 2011 Prospective Plantings report. RFA noted that in the past 20 years, the prospective corn acreage estimate has varied from the final acreage estimate by an average of 1.14 million acres, with acreage estimates falling below the actual acreage eight times, and above 12 times. RFA Vice President Geoff Cooper said 2011 ethanol production is expected at 13.8-14 billion gallons, using about 5 billion bushels of corn. He noted that the ethanol industry’s share of U.S. corn supply is regularly overstated at 40 percent, when on a net basis ethanol will actually use only 23 percent of the 2010/11 corn supply, with the remaining 77 percent going to the feed and food markets. In response to the food versus fuel debate and concerns about rising food costs, RFA stated that corn is a minor cost component of most retail food items. RFA said a 50 percent increase in the corn farm price would be expected to raise the price of a box of corn flakes by just $0.02 per box, or about 0.5 percent of the total retail price, assuming no other cost increases. For products like meat and dairy where corn is a more important component, RFA said expected retail cost increases resulting from a 50 percent increase in the corn farm price are slight at just 2-3 percent of total retail cost. RFA also said just 12 cents of every retail food dollar pays for farm goods/raw ingredients; that U.S. corn exports have not declined as ethanol use has expanded; that U.S. ethanol uses just 3 percent of the world grain supply; and that grain is not being “diverted” for fuel use. On March 30, RFA called on President Obama to continue working with the ethanol industry and Congress to reshape ethanol tax policy while helping the sector expand and evolve. “The ethanol industry has stepped up to the plate and said we’re willing to reform our tax incentives so we can reduce costs,” said Bob Dinneen, RFA president and CEO. “I hope we’re looking more deeply at what we want our energy future to be. I hope we’re looking at all energy tax incentives – do we still need to be subsidizing petroleum, for example?”