The current amounts of biofuel to be produced still could drive up corn prices and set a mandate for the amount of corn that must be used for conventional biofuel production, which creates an inelastic market, the Council said.
An inelastic market does not see price drive demand, but allows sales to remain regardless of higher prices and can reduce feed availability.
The comment period on the US Environmental Protection Agency’s (EPA) proposed Renewable Fuel Standard (RFS) for 2017 and Biomass-based diesel volume for 2018 ended Monday. The potential targets for types of biofuel were released in May.
The increased biofuel levels are part of an ongoing effort to boost production and domestic use of renewable fuel, reported the EPA.
“This is the one opportunity to comment to EPA on the proposed rule for the volume obligations,” Mike Brown, council president, told FeedNavigator. “The longer term solution is a legislative fix to the RFS that is broken.”
The National Chicken Council said in its comments that they support the proposal to decrease the amounts of biofuel to be generated, but it would like to see amounts lowered further. The new targets would increase levels of total biofuel production from 18.11bn gallons in 2016 to 18.8bn gallons in 2017.
“Ethanol production usually hits 105% of the conventional mandate,” said Brown. “A conventional mandate of 14.8bn gallons would thus translate into 15.54bn gallons of production, which would use 5.55bn bushels of corn instead of the 5.3bn bushels. That could leave the year end stocks to use ratio at 13% instead of the projected 15%, potentially pushing up prices.”
Addressing the program
The Council continues to advocate for a reduction or reassessment of biofuel targets set, it said in its comments to the EPA. “NCC requests that EPA use its waiver authority to make further reductions in the overall biofuel use volumes in order for the implied conventional biofuels volume obligation to be lowered to reflect the role of the conventional biofuel implied mandate that was envisioned by Congress under the projected scenario presented at the time EISA was crafted,” it added.
The group maintains that the increased use of corn in biofuel and price support for biofuel production puts poultry producers at a disadvantage when competing for supplies of the feed crop. The industry also does not see some of the same price protections or incentives that parties involved in biofuel creation have.
“The impact of the food versus fuel pressure on feedstock has been severe,” the Council said. “Since the RFS was enacted, chicken companies have faced $53 billion in higher actual feed costs due to the RFS. During the RFS era, at least a dozen chicken companies have ceased operations –filing for bankruptcy or having been acquired by another company.”
Biofuel production targets
The proposed levels of biofuel for 2017 differ by type of biofuel, ranging from cellulosic biofuel, to that based on biomass or conventional biofuel using ethanol generated from corn.
The proposed levels of cellulosic biofuel were set at 312m gallons a year, an increase of 82m gallons from 2016, said the NCC. Biomass biodiesel was set at 2bn gallons a year up 100m gallons from 2016.
Advanced biofuel total is set at 4bn gallons, a boost of 390m gallons in 2016, the council reported. And the total renewable fuel was set at 18.8bn gallons, an increase of 69m gallons from 2016.
In total, the amounts would mean the production of about 14.8bn gallons of conventional, or corn-based, biofuel, the group said. That would be a growth of about 300m gallons from 2016.
“Based on historic production, NCC believes these are overly aggressive assumptions,” the group said. “Thus, the 14.4bn gallon level for ethanol is too high.”
If the biodiesel levels are too high, the easiest way to meet the mandated amount will lead to additional corn ethanol than what was used by the EPA in setting the volume obligations, added a council spokesperson.
Although feed prices are currently low, the volume obligations are for next year, said Brown. “The market impact on prices will play out next year. And as we say repeatedly, we are one drought flood or freeze away from another 2008 or 2012,” he added.
Creating larger amounts of ethanol means that more corn will be needed for the process,the Council said. That cost increases affect all corn users, but poultry producers don’t have the same ability to use biofuel industry co-products like dried distillers grains (DDGs) that some feed users have.
“Moreover, with the increasing demand for biodiesel that is driven by the RFS, corn oil (referred to as distiller oil) is increasingly extracted from these distillers grains,” the Council said. “Currently, 85 percent of all ethanol production is from dry mills with oil extraction according to the Renewable Fuels Association. Distillers grains with oil extracted are even less valuable to poultry producers than distillers grain without oil extraction.”