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NCC to EPA: Slash Proposed 2020 Ethanol Volumes, Implement ‘Off-Ramp’ Waiver

Dan Biofuels/Energy, Industry News Release, Poultry

Chicken producers incur $68 billion in higher feed costs since 2007 RFS

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Washington, D.C. (NCC) – Given the current uncertainty regarding the 2019/2020 crop year corn supply, NCC in comments submitted today to the Environmental Protection Agency (EPA), said the proposed volume for 2020, coupled with the recent waiver that will increase the use of E15, is overly aggressive, overly reliant on corn-based ethanol, and will likely cause disruptions to the nation’s feed supply.

“The proposed volumes, especially conventional ethanol, should be reduced in the final rule to more accurately reflect the availability of feedstock and the usage rate of biofuels,” said NCC President Mike Brown.

Since 2007 under the Renewable Fuel Standard (RFS), broiler producers have faced $68.5 billion in higher feed costs for the production of broiler meat. When breeders and pullets are factored in, the cost is dramatically higher. As corn users, therefore, NCC’s members are substantially impacted by the RFS and its impacts on the corn market and feed supply.

It is clear that the mandated use of ethanol under the RFS has only served to add unprecedented volatility to the corn market during times of supply disruptions, as the chart below shows:

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Looking toward the 2020 Required Volume Obligations (RVOs), NCC believes that the potential for supply disruption and a resulting similarly destructive pattern as 2008 and 2012/2013 poses a threat to the broiler industry during the 2020 RFS compliance year and 2019/2020 crop year.

  • First, the corn market is still uncertain and volatile given the supply and demand situation, and yet EPA has set conventional ethanol volume at the statutory maximum.
  • Second, EPA has already added more potential volatility given its waiver under the Clean Air Act (CAA) to allow the year-round use of E15 in finished motor fuel, which has the potential to utilize an amount of corn ethanol that exceeds the statutory maximum.

“Thus NCC believes that it is imperative for EPA to comply with the statute and Congressional intent in the consideration of its use of the “off-ramp” waiver authority as provided under Section 211(o)(7)(A) of the statute,” Brown added NCC suggests that a predictable, transparent off-ramp that would be fair to all involved be based on the USDA stocks-to-use-ratio in the June 2020 WASDE report. Partial waivers for the remainder of the compliance year (i.e. approximately six months) would be structured as the table below presents:

Stocks to Use RFS Waiver Amount
More than 10% No waiver
7.5% to 10% 10%
6% to 7.49% 15%
5% to 5.99% 25%
below 5% 50%

“On two separate occasions, in 2008 and again in 2012, chicken producers were denied protection from the impact of the RFS mandate during times of market volatility – this cannot happen a third time,” Brown said.

Brown concluded, “NCC strongly supports efforts to create a more reasonable and sustainable approach to the nation’s biofuel policy. Foremost is restoring a workable off-ramp for times when the possibility of supply disruptions continue to threaten the chicken industry and the more than 1.2 million people it supports.”

NCC’s detailed comments can be read in their entirety by clicking here.

Source: National Chicken Council