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Drought fueling debate on lifting ethanol mandate
MONROE - Corn prices jumped from almost $6 per bushel in late June to more than $8 per bushel in early August. That's good news for cash crop farmers, and not-so-good news for farmers needing feed for livestock.

The news is also adding fuel to the debate over ethanol production, and how much of the nation's corn resources should be going to produce the biofuel.

In light of the worsening drought and crop damage currently affecting much of the nation, the USDA dropped its 2012 corn production forecast to 10.8 billion bushels, down 13 percent from 2011 and the lowest production since 2006, according to the National Agricultural Statistics Service (NASS) crop production report released Friday, Aug. 10.

But even before the report came out, some agricultural organizations and elected officials were calling for a moratorium on the Renewable Fuel Standard (RFS), commonly known as the ethanol mandate. The RFS in 2012 requires about 40 percent of America's corn crop to go into ethanol production.

Reducing or eliminating the mandate requirements would lighten the consumption of corn and lower the price, they say.

Those in favor of ethanol point out the fuel is renewable, decreases dependence on foreign oil, opens up new markets for farmers and creates jobs - some estimates put that number at more than 400,000 nationally.

The issue is complex and in the debate, some local farmers are not sitting on the side where they might be expected.

Dairy farmer wants to keep ethanol mandates

Ethanol production "creates jobs in America," said Jeremy Mayer, a dairy farmer in rural Monroe. "People need jobs to buy milk and cheese. Corn - we're always going to be growing it."

Mayer sells most of his milk to Chalet Cheese Cooperative, just up the road from his barn where he milks 50 dairy cows. He isn't too concerned about a corn shortage this year, despite the drought across the county's midsection. He said his corn on bottom land did well, compared to the hilltops, offsetting the drought-damaging yield.

"The U.S. is producing more bushels per acre than ever before," Mayer said. "You don't have to get too far till you get where they got rain. The corn is beautiful."

Loss of pasture grass this summer had some farmers scrambling to feed next year's hay supply. To balance his feed costs this year, Mayer said he will be mixing poorer set-aside grass hay with his higher quality alfalfa hay, feeding the richer blend to the milk cows. Another 50 head of younger stock will get by on cheaper blends.

Mayer expects many dairy farmers will cut back on the $8-per-bushel corn feed, which will reduce their milk production.

"Milk prices are dependent on corn prices," he added.

Cash crop farmer wants the mandate lifted

But another area farmer, a cash crop farmer who asked not to be identified, said the mandate should be lifted.

"Corn prices have to come down," he said, "otherwise you won't have any meat or milk. And I like my ice cream and hamburger.

"You'd think I'd like to see corn prices stay up," he added. But high corn prices will "take out a lot of the weak" farmers with small operating margins, if not now, then in the spring when farming costs, like seed corn and chemicals, will skyrocket, he said.

"A lot of seed corn is grown in the Midwest," he said. "When they (seed corn and ag product companies) see what farmers are getting for their crop, they want to get a part of it."

He noted other drought problems plaguing farmers this year.

The USDA is "over-projecting" corn production, he said. "Nobody knows; they still think we have 120 bushel per acre," he said.

Wisconsin farmers planted about 4 percent more acreage into corn this spring than last year, according to USDA reports. Many were hoping to cash in on the rising corn prices from 2011. The USDA predicts Wisconsin yields to be down 15.4 percent, to 132 bushels per acre, with state total production coming in at 12 percent lower than last year.

"A lot of farmers aren't going to be able to fill those $5-per-bushel corn contracts. Not enough production to fill them," he added. "They'll have to buy them back, or buy $8 corn to fill them."

Although winter wheat yielded well and its prices were good this year, Wisconsin farmers planted 25 percent fewer acres of it to make room for more corn. Production came in at 17 lower than last year.

"I had a funny feeling this year and took out (crop) insurance. A third of farmers don't have it," he said.

He predicts, with exports, ethanol production and the drought, the U.S. could see some hard times for corn needs.

"This (drought) is wide spread. And there's no government carry-over in storage," he said. "We're at the lowest (supply) in years."

Ethanol effects reverberate through economy

For his part, Green County Farm Bureau President Jeff Ditzenberger takes a wide view of the community as a whole in the ethanol debate.

He said while milk prices do need to "come up drastically" to offset feed prices, the answer is not cutting ethanol production - ethanol production creates jobs inside and outside the plants.

"It's not just about the corn for cows," he said. "Look at all the truck drivers who stop in town to eat and fuel up and shop for parts at Farm and Fleet and implements dealers.

"I don't think people realize that $1 of agriculture money is turned over eight times in the community," he said.

Ditzenberger said there is plenty of "corn in the bin yet" from 2011 which hasn't hit the market to make room for this year's harvest.

"Eight dollar corn is still $8 corn" he said, "that price is set by the Chicago board of Trade. But out of that $8 corn, you get not only the ethanol, but a 23 percent protein by-product," which is used in feed mixes, he said.

Corn is normally 8 percent protein, so "you save money on the protein side," he said.

Ditzenberger believes that if every vehicle ran on E10 ethanol blended gasoline, as was recommended seven years ago by the RSF program, "we could eliminate our need for foreign oil.

"It's not the end-all, cure-all," for renewable fuel standards, he said. "We have to find other alternatives for fuel."

"Unfortunately, some (corn) contracts will go unfulfilled," he said, "Will some have to throw in the towel - yes, but farmers are also going to be looking at the overall picture.

"Ethanol is good," he said, "and it's so much more than corn."

Pressure to lift the mandate

The USDA is predicting food prices to rise about 3 to 4 percent, not much more than normal inflation. But many opponents of the mandate are pointing to that increase as just one more reason for the EPA to end its ethanol production requirements. And officials and lawmakers who agree are stepping in and asking the EPA to do just that.

Jose Graziano da Silva, Secretary General of the U.N. Food and Agricultural Organization (FAO) on Thursday, Aug. 9, called for an "immediate, temporary suspension" of the mandate to help avert a repeat of the 2008 food crisis.

Late last week, Gov. Jack Markell of Delaware and Gov. Martin O'Malley of Maryland called for the EPA to waive the RFS standards for the next year. They wrote to EPA Administrator Lisa Jackson. "... it would make more than 5 billion bushels of corn available to the marketplace for animal feed and foodstuffs" and drive down costs. Because the request comes from state governors, the EPA will have 90 days to make a decision.

Earlier this month, about 155 House Members and 25 Senators, from both parties, sent letters to Jackson asking her to adjust "the normally rigid Renewable Fuel Standard to align with current market conditions.

" ... approximately 40 percent of the corn crop now goes into ethanol production, a dramatic rise since the first ethanol mandates were put in place in 2005. Ethanol now consumes more corn than animal agriculture, a fact directly attributable to the federal mandate," the letter stated.

A coalition of meat, dairy, and poultry producers, led by the National Pork Producers Council (NPPC), petitioned Jackson on July 30, to waive the blending requirements for this year and next.

"The drought-induced reductions in the corn supply means that the mandated utilization of corn for renewable fuels will so reduce the supply of corn and increase its price that livestock and poultry producers will be forced to reduce the size of their herds and flocks, causing some to go out of business and jobs to be lost... these herd and flock reductions will ripple through the meat, milk and poultry sectors, causing severe harm in the form of more job and economic losses. This drought-induced harm exists now, will continue to exist into the latter part of 2012 and 2013, and could continue to be felt in 2014 depending on the policy choices made now," they wrote.

As of Tuesday, Aug. 14, Jackson had not made a response to any of the requests.