Texas Is Fed Up With Corn Ethanol

By Rick Perry
Tuesday, August 12, 2008

At what price will corn be so expensive that the federal government will decide that it is time to stop driving up the price of food?

Three years ago, Congress imposed a Renewable Fuel Standard (RFS) mandate that has forced the gasoline industry to mix massive amounts of corn-based ethanol into the nation's fuel supply. In 2007, Congress nearly doubled that mandate to require nine billion gallons of ethanol be blended into gas in 2008 and even more in 2009.

But, as a safety valve, Congress gave the Environmental Protection Agency (EPA) the power to waive the new mandates if they turn out to have unforeseen, negative consequences.

As we can see now, the diversion of our corn supply from grocery stores to gasoline pumps has caused the price of corn to spiral out of control. Corn prices were once driven by market forces. Today they are artificially driven up by a government mandate. In 2004, before the mandates were imposed, the cost of corn hovered around $2 per bushel. Now it is close to $8 per bushel.

This is driving up the cost of staple food items at the grocery store. And it is also driving up the price of corn-based feed, devastating the livestock industry to the point that Texas cattle feeders have been operating in the red since 2007.

Even our largest agriculture companies are taking a hit. Pilgrim's Pride and Smithfield both posted huge losses this past year. Tyson's bonds were downgraded. And New Way Pork, Texas's largest independent pork producer, has been driven out of business by feed costs that have risen 50% since 2004.

Some of our large companies may be able to weather this storm, but the future is uncertain for small-to-midsize companies. And two thirds of our state's nearly 150,000 cattle producers run fewer than 50 head of cattle.

I first raised my concern about this issue in July 2007 when I rolled out Texas's bioenergy strategy, noting that we do not want to be forced to choose between fueling our cars and feeding our families. Later that year, Congress increased the RFS mandate.

Since then, higher costs have chipped away at our food budgets and sent livestock producers deep into debt. In April, I decided something had to be done.

I asked the EPA to cut the grain-based ethanol mandate in half for one year. In response, the agency opened a comment period and within 30 days received more than 15,000 comments from across the country, most of which apparently supported my request. The outpouring of support for this waiver was so overwhelming that the EPA delayed its decision announcement by almost two weeks after the 30-day comment period had elapsed.

Last Thursday, the EPA announced it was denying my request. Why? Because the agency's agriculture and energy economists said the mandates are not causing sufficient damage to warrant action. This not only goes against common sense, but runs counter to the experience of Americans at the grocery checkout counter.

Denying Texas's request is a mistake that will continue to force families to bear a heavier financial burden to put food on the table than necessary and harm the livestock industry.

Supporters of the ethanol mandate have their hearts in the right place if they want to diversify this nation's fuel supply. But artificially propping up an industry to the detriment of the vast majority of Americans is bad policy. And that's what this mandate does.

There are many sources of renewable energy in addition to corn-based ethanol. It is time America took steps to develop the technology to make use of these sources.

Texas is leading the nation in this movement. We are a top contributor to the nation's domestic fuel supply, and a leader in wind, biofuel and solar energy production. We harness the benefits of clean and efficient nuclear power, and are investing considerable resources in developing nonfood bioenergy such as algae, switchgrass, jatropha and camelina—all of which have minimal impact on food production and the environment. The U.S. would be wise to follow Texas's lead.

The EPA needs to stop using bureaucratic definitions of what constitutes "severe economic harm" and take a look at reality. American families are struggling to put food on the table because of rising food prices. Without a doubt, the destruction of the Texas livestock industry—the nation's largest beef producer—constitutes severe harm to our country's economy. Forcing Texas ranchers to close their doors because they can no longer afford to feed their livestock takes food off the table for millions of Americans. If that's not "severe economic damage," what is?