EPA Ethanol Rule Good For Corn, Bad For Feeders

The new ethanol blend mandate from the Environmental Protection Agency last week is good for corn growers, not so good for livestock producers.

The EPA’s 2017 Renewable Fuel Standard mandated a 1.2-billion-gallon increase in the amount of renewable fuels blended into the fuel supply next year to 19.28 billion, a 6% increase over current levels and a record total.

The agency also called for 15 billion gallons of ethanol to be produced from corn in 2017.  One bushel of corn produces about 2.8 gallons of ethanol, so the mandate will use about 5.439 billion bushels, or 35.7%, of the estimated 15.23-billion-bushel 2016-17 crop.




As might be expected, US corn producers are ecstatic about the government mandating demand for 35.7% of their crop.  Texas farmer Wesley Spurlock, president of the National Corn Growers Association, issued a statement on the association’s web site saying the EPA had “moved in the right direction by increasing the 2017 ethanol volume to statute.”

The EPA last year left its ethanol blend mandate below the statute level because an increase in more fuel-efficient cars and trucks and a decrease in miles driven made it nearly impossible to blend as much ethanol as the law mandated since that much fuel wasn’t being used.

And, since 10% or less ethanol in gasoline is considered the optimal top for effectiveness, few expected the EPA mandate to be raised.  The new rate effectively challenges the automobile industry to come up with engines that will burn fuels with more than 10% ethanol.

Some consumers also dislike ethanol-blended fuel because ethanol produces fewer BTUs when burned, reducing engine performance and/or mileage.

But the EPA cast all that aside with the new mandate.

Spurlock called the move “critical for farmers facing difficult economic times, as well as for consumers who care about clean air, affordable fuel choices, and lowering our dependence on foreign oil.”




The National Cattlemen’s Beef Association and the National Pork Producers Council have yet to issue a statement about the new EPA ruling for next year.  However, mandated demand for the second-largest expense in feeding cattle can hardly be described as a good thing, one feedlot manager said.

The feedlot manager chafed at using food for fuel and felt that the emissions from ethanol were just as bad as the emissions from non-ethanol fuel – just different.

Besides, he said he has seen the lower mileage from ethanol fuels versus non-ethanol blends.

Corn futures responded to the EPA announcement with higher prices, but by Friday, some of the new had worn off, and the market closed lower on Friday.  Some technical traders see more of investment in soybeans currently with what is seen as a greater export pull than with corn or wheat.

In fact, wheat prices are low enough to generate talk of grazing out some fields rather than to harvest them.




Live-basis cash cattle trading last week was up $4 per cwt from the previous week at $109 to $113, mostly $112.  Dressed-basis prices were steady to up $2 at $170.

Cattle sold in the online Superior Auction at an average of $109.14 per cwt live, up from $106.79.

The USDA’s choice cutout Friday was $1.00 per cwt higher at $187.64, while select was up $1.18 at $171.30.  The choice/select spread narrowed to $16.34 from $16.52 with 78 loads of fabricated product sold into the spot market.

The CME Feeder Cattle Index for the seven days ended Thursday was $127.82 per cwt, down $0.11.  This compares with Friday’s Jan settlement at $127.22, up $2.32.