Looming corn shortfalls due to the worst drought in decades have put the squeeze not just on farmers, but also the ethanol industry.
As corn prices skyrocket and harvest projections plummet, renewed attention is being put on the Renewable Fuel Standard, which mandates a certain percentage of the crop go to fuel.
Critics argue this mandate creates a situation where fuel is put before fuel. Concern is growing that food prices will spike due to a weak corn harvest made weaker by the mandate that 13.2 billion gallons of fuel must be made from the crop.
The U.S. Agriculture Department cut its projected U.S. corn production to 10.8 billion bushels, down 17 percent from its forecast last month of nearly 13 billion bushels and 13 percent less than last year. Indiana’s corn harvest is expected to be nearly 30 percent less than last year’s haul.
Livestock farmers dependent on corn for feed have lobbied Congress to press the Environmental Protection Agency to waive the mandate.
Even the United Nations is growing concerned over the mandate. Jose Graziano da Silva, director general of the UN’s Food and Agricultural Organization, wrote an op-ed in The Financial Times that temporarily waiving the mandate would allow more corn to go toward food and feed.
John Woodmansee, Grant County Purdue Extension director, said since livestock farmers are dependent on feed corn they have been hit by the rising price of corn.
“Obviously that’s a tremendous challenge to them,” he said. “It’s something they’ve had to deal with continually the last five or six years.”
Wayne Townsend, a former Hartford City hog farmer and Democratic gubernatorial candidate, said the government mandate has created unintended side effects.
“We have sort of mandated our way into a crisis,” he said. “With weather conditions the way they are, we need to find a way to ration corn beyond price. (The) most sensible and easiest way (to do that) is to cut back on ethanol production and make it available for livestock. I’m among those that think food on the table should come first.”
Wally Tyner, an agricultural and energy economist with Purdue University, said the ethanol mandate is “contentious” in the livestock sector.
However, he said waiving the mandate is easier said than done.
Due to the growth the ethanol industry, oil refineries now produce 84 octane gasoline that blends with 10 percent ethanol to produce 87 octane fuel.
Tyner said there was some debate over how fast oil refineries could switch back to producing 87 octane fuel.
“If these technical constraints are real and it takes time to switch, the impact (of the mandate waiver) could be nothing,” he said. “The bottom line is we don’t know how much flexibility they have.”
Ethanol companies have also been feeling the pinch this year. Tyner said there has been about a 15 percent drop in ethanol production since June.
“Ethanol producers are being squeezed by high corn prices,” he said.
Central Indiana Ethanol is currently expanding its headquarters in Marion. In June, company officials said the new building became necessary as the company continued to grow. They could not be reached for comment on Friday.
The Associated Press contributed to this report.