Summary:

NCBA’s producer-members support our nation’s commitment to reduce dependence on foreign energy, and efforts to develop forms of renewable energy.  This commitment is creating both opportunities and challenges for our nation’s agricultural producers.  NCBA supports research and development of renewable fuels that may provide additional benefits for the livestock industry.

President Bush signed a new energy bill into law on December 19, 2007.  This new law mandates that 36 billion gallons of renewable fuels be produced by 2022.  Fifteen billion gallons of fuel are to come from grain-based sources such as corn. (See “New Renewable Fuel Standard” chart below.) 

NCBA member policy opposed increasing this government mandate because of the negative impact the mandate would have on corn prices and supplies.  The livestock industry is facing some significant adjustments now that the government has stepped into the marketplace.

According to a recent USDA’s corn stocks report, corn futures will likely remain above $5 per bushel through December 2010. This has directly contributed to a significant decline in the value of feeder cattle futures.

Background:

Past federal support of the renewable fuels industry has been necessary to encourage initial development of basic production technologies.  But recent surges in corn-based ethanol production have created concern among livestock producers about the availability and price of feedgrains and other feedstuffs. 

“As the U.S. ethanol industry continues to expand, the amount of corn used for ethanol production is increasing dramatically. Corn use for ethanol more than doubled between 2001 and 2005.” 

- Source:  Renewable Fuels Association

On March 8, 2007, NCBA member and Texas cattle feeder Ernie Morales testified before the House Agriculture Subcommittee on Livestock, Dairy, and Poultry at a hearing on feed costs for the livestock industry.  Morales told the committee how livestock producers across the country are struggling to find reliable sources of animal feed amid drought, wildfires, winter storms, transportation challenges, shortage of hay and forage, and soaring corn prices.

“The livestock industry remains the largest consumer of corn by utilizing almost 58 percent of the total corn used over the past decade.  In the past year alone, cattle feeders have seen a 92 percent increase in cash corn prices."  (January-February 2007 price at $3.68 per bushel, compared to $1.91 per bushel in 2006.)

“In time U.S. corn producers can meet this rapidly expanding additional demand. However, until the appropriate acreage and yield adjustments can be made during this transition, USDA’s current projection of a 50 percent year-to-year increase in ethanol-based corn demand from 2.15 to 3.2 billion bushels will be felt squarely in the wallets of every feeder and cow-calf producer in this country.”
- NCBA member and Texas Cattle Feeder Ernie Morales, March 8, 2007

Subsidies:

NCBA members think it’s time to move toward a market-based approach for the production and usage of ethanol produced from livestock feedstuffs.  NCBA supports sunsetting the existing blending tax credit (VEETC) and the ethanol import tariffs as scheduled and not allowing for renewal in their current form:

·         Blender Credit (VEETC, or Volumetric Ethanol Excise Tax Credit)

51 cents per gallon, Expires December 31, 2010

·         Import Tariff

54 cents per gallon, Expires January 1, 2009

These subsidies were primarily designed to boost the initial development in renewable fuels production and technology.  However, with feedgrains-based ethanol production now growing at an astounding pace, cattlemen do not consider it appropriate for Congress to renew these mechanisms in their present form when they expire near the end of the decade.

“Today the ethanol industry is a thriving growth segment of America’s energy and national economy…Based on industry projections for 2006, the U.S. ethanol industry will produce nearly five billion gallons – a 25 percent increase over 2005 production.”

- Source:  Renewable Fuels Association

“At some point in the future all these technologies need to stand the test of the free market.”
- U.S. Energy Secretary Samuel Bodman
at the World Economic Forum in Davos, Switzerland, January 2007

New Renewable Fuel Standard (RFS):

Year	Conventional Biofuel (made from feedgrains)	Advanced Biofuel	Cellulosic Biofuel	Biomass-based Diesel	Undifferentiated Advanced Biofuel	Total RFS
2008	9.0