Governor Rick Perry
Wall Street Journal
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?
Mr. Perry, a Republican, is the governor of Texas.
