Could Feed Costs Be Higher Under RFS Waiver?

Could Feed Costs Be Higher Under RFS Waiver?

Study finds little or adverse effect on livestock producers; beef producers only projected 'winner'

Waiving the Renewable Fuel Standard in 2013 could result in higher net feeding costs for livestock and poultry producers, according to a new analysis conducted by Cardno-ENTRIX and commissioned by the Renewable Fuels Association. The study found that if a waiver of the RFS did reduce biofuel output, small corn price reductions would be partially or fully offset by increased prices for other feed ingredients like distillers grains and soybean meal.

Another study claims little or adverse effect on livestock producers; beef producers only projected 'winner'

Distillers grains, corn gluten feed and corn gluten meal are co-products of ethanol production that are fed to livestock and poultry. RFA reports that every bushel of corn processed by an ethanol plant produces 2.7-2.8 gallons of ethanol and approximately 16-17 pounds of animal feed. RFA says also the U.S. ethanol industry produced 40-42 million tons of animal feed in 2011, including 37-38 million tons of distillers grains. Production of biodiesel from soybean oil has also driven use of its by-product, soybean meal.

"When viewed in the context of changes in the prices for other key feed ingredients such as distillers dried grains with solubles and soybean meal, the change in total net feed costs for livestock, dairy and poultry feeders would either increase slightly or decrease by a negligible amount if a waiver was granted," according to the study, conducted by economist John Urbanchuk.  "This is due to the fact that if a waiver reduced biofuel output, it would also reduce the available supply of DDGS and soybean meal, which would naturally lead to higher prices for those key feed ingredients."

The analysis shows that if ethanol and biodiesel production were each reduced 500 million gallons in 2013 under a waiver of the RFS, total feed costs would increase 4.1% for dairy, 0.8% for layers, 0.5% for hogs, and 0.2% for broilers. For beef cattle, feed costs might fall by 0.6% with a waiver.

"Most of the analyses conducted to date have only focused on the potential impacts of a waiver on corn prices," said RFA President Bob Dinneen. "But what's important to consider is the overall net effect on the cost of feeding livestock and poultry. Corn is only one feed ingredient for typical livestock and poultry rations, and DDGS now comprises one-fifth to one-half of most livestock and poultry rations today."

Previous studies from the University of Missouri Food and Agricultural Policy group and Purdue University both found that, if a waiver was passed, effects won't be immediately noticeable. The FAPRI study indicated that the corn market may actually experience more differences in the 2013-14 marketing year than in 2012-13.

Comments to the EPA regarding the waiver close Thursday. A decision is expected in November.

TAGS: Soybean
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