Hometown Farmer: Ethanol Debate Heats Up
(NEAR BERESFORD, SD) - Livestock producers and governors from at least six states are pushing the federal government to temporarily relax the "Renewable Fuels Standard", known in the industry as the "RFS." It's a mandate that fuel companies must use 10 percent ethanol in their gas.
With the drought causing corn prices to skyrocket, livestock producers say if the government freed up more corn for feed, instead of gas, food prices would stay lower for Americans.
Paul Shubeck runs a corn and soybean farm near Beresford, SD. And he, like many farmers, markets his corn to ethanol producers. Paul talks about why he believes congress should not change the RFS.
Shubeck started farming this land 30 years ago after he bought it from his father. In all those years, he's never seen crops so dry.
"We're looking at pretty much a drought disaster in our area," said Shubeck.
Paul ships off much of his corn to ethanol producers. He typically uses about 30 percent of his corn crop for ethanol, about 20 percent gets exported, and the remainder goes to feed and what farmers call, "industrial uses."
"They only use the starch portion of the corn and so the protein is returned to the feed source. And so there's still, when you make ethanol, you're making feed as well. And you take out the starch," explained Shubeck.
Right now, he's concerned about the ethanol industry. The EPA is under pressure to temporarily lift its rule that requires gas companies use 10 percent ethanol.
"The profitability of ethanol might come into play because it's really the margin between the price of ethanol at the pump and the price of corn that you have to buy," said Shubeck. "And so at some point in time it becomes unprofitable."
U.S. ethanol producers are closing plants and rapidly scaling back production, proving this summer's drought is not only affecting corn itself.
One advocate for ethanol says if Congress waives the RFS, it will have a domino effect.
"I think it'd be a bad deal for America. Not just people like me. Like a bad deal for agriculture, for folks around all of our 50 states that don't understand biofuels really is a great piece of our future. And if we're given the right opportunity, every state in our country can benefit from this energy legislation," aid Kelly Manning, the Vice President of Development for Growth Energy.
Both Manning and Shubeck said keeping the RFS boils down to what's ahead for America.
"It means it's a place to market our corn. You know we had problems marketing our corn for 30 years because the basis, the difference between the Chicago price and our price was up to a dollar a bushel. And so we got a dollar a bushel less than they did in Chicago," said Shubeck.
"It's just important for what's to happen in the future. The future investment will probably not come into our industry if not for the renewable fuel standard," said Manning.
Paul did note, though, that this is the fifth greatest drought in America's history. Just because the U.S. may be losing bushels of corn from the extreme heat, he said there will still enough corn for companies and consumers to use in the coming months.