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Ethanol Industry Disputes New Study

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The Renewable Fuels Association says Big Food and Big Oil are on the defensive after losing their bid for an RFS waiver; on Wednesday the National Council of Chain Restaurants introduced new findings claiming that, in 2015, the RFS will cost American chain restaurants between $3.2 billion and $503 million. The study’s release was accompanied by a guest opinion piece in the Wall Street Journal.

RFA claims that NCCR avoids discussion of what really drives food prices in both; RFA President Bob Dinneen says “every reasonable analysis” of the factors influencing food prices has concluded that the cost of diesel fuel, gasoline and other energy inputs is the major driver. Dinneen says the RFS is working, with renewable fuels already displacing 10% of annual gasoline demand, and that the study simply cherry-picked data supporting the NCCR’s position.

Dinneen also says food prices are not advancing abnormally. Both USDA and the Department of Labor report that annual food inflation in 2012 and 2013 will be in line with the 20-year average. RFA notes food inflation rates since adoption of the RFS in 2005 have actually been lower on average than they were throughout the 1980s and early 1990s.

Congressman Bob Goodlatte, who introduced H.R. 3098, the “Renewable Fuels Elimination Act,” has promised to keep working for a repeal in Congress next year, and he hopes his colleagues will see this report as further justification that a reprieve from the RFS is appropriate. Goodlatte also thanked the chain restaurants and owners who have been working to educate members of Congress on how the RFS hurts their bottom line.

Meanwhile Growth Energy CEO Tom Buis also responded to the study; he says just 14% of the price of food is attributable to the cost of the commodity itself. For the rest, he agrees with Dinneen; prices go up with energy costs, as well as marketing. Buis says there’s a lot involved in getting food from farm to fork, and the processing, packaging, wrapping, storage, refrigeration and transportation costs are all energy-intensive. Buis believes groups like NCCR distort the facts to justify higher profits, which is ignorant of the price Americans pay for food; the lowest per capita cost in the world.

National Corn Growers Association President Pam Johnson also weighed in, pointing out that the PricewaterhouseCoopers-conducted NCCR study limited itself to just two possible scenarios for the kind of impact the RFS mandate would have on food prices in 2015 if purchased at 2011 levels. Johnson says EPA looked at 500 scenarios in its decision earlier in November, and decided to reject an unnecessary waiver request.

EPA examined the impacts of the RFS on the economy in the 2012-2013 marketing year and found that, for 89% of the scenarios, the RFS “would have no impact on ethanol use or corn price.” Just 11% of the 500 scenarios indicated a change in ethanol use and with it a change in corn price. The average change in corn price over all 500 scenarios was 7 cents per bushel of corn; for the 11% of scenarios in which the RFS waiver would affect the economy, EPA found the average change in corn price to be 58 cents per bushel.

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