The American Meat Institute (AMI), National Turkey Federation, National Chicken Council and FarmEcon LLC recently submitted comments to the to the Environmental Protection Agency (EPA) sharply criticizing the EPA's proposed changes to the Renewable Fuel Standard (RFS), citing inadequate analysis of the proposed rule's impact on agricultural commodity prices.
The groups noted that EPA's proposed regulations have not considered the risks associated with variability of grain crop or other biomass production, which would have serious consequences on food and fuel production costs in years of reduced crop production.
"Increasing the level of biofuel production in the current RFS has already resulted in a strong link between energy prices and agriculture prices," the comments noted. "Energy prices are highly volatile, and the link between that volatility and increased volatility of agriculture commodity prices has become a major issue facing commodity producers and users."
The comments note that volatility has very real consequences for food producers that go beyond the increased cost levels already seen. Furthermore, they explain that until EPA performs a risk assessment that takes into account not only average prices, but also variations around average prices, the real costs of the RFS are unknown.
According to Farm Econ LLC, if the RFS is increased to 20 billion gallons of grain-based ethanol per year, consumers could see almost a 5 percent increase in average food costs. This estimate is based on $3,778 in food spending per capita. The impact on retail food costs as a result of higher farm commodity prices was clearly evident in 2008. Last year, one of substantial increases in grain and soybean prices, the Consumer Price Index for food increased by 5.9 percent.
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