Mandating that 13.8 billion gallons of ethanol be blended with gasoline in 2013 will result in a meat and poultry production value loss of about $30.6 billion when compared with potential production without a renewable fuel standard (RFS) mandate for ethanol, according to “Ethanol Production: Economic Impact on Meat and Poultry Consumption, Value, and Jobs” issued this week by FarmEcon LLC. Combined meat and poultry consumption next year would be 25 pounds per person higher if corn was not forced by the government to be used for ethanol.
Since 2007, when the RFS was implemented, the aggregate economic loss through estimated 2013 is almost $107.7 billion. Also, 28.5 billion pounds of meat and poultry could have potentially been produced during 2007 through 2013 but were not because of corn’s diversion to ethanol, the study found. Adjusted to a per-capita-consumption basis, the 28.5 billion pounds equates to 91.2 pounds of meat and poultry not available to consumers.
Using corn to produce meat and poultry creates 30 times more jobs than using corn to make ethanol. By forcing a shortfall in the potential production of meat and poultry, several hundreds of thousands of jobs, both direct and indirect employees, have been lost.
The study asked a basic fundamental question that “given these vast differences in end product value, why has so much corn gone into ethanol production? Market forces played a role as the value of fuels increased relative to the value of food production. The RFS also played a significant role. It can be argued that the relative importance of market forces versus the RFS mandate as drivers of higher ethanol production. However, market economics on a level playing field do not permit this kind of gross mis-allocation of resources. Only a government law that mandates the use, and thus production, of ethanol makes possible the recent, large diversions from high value to low end product value production,” the study said.
Another troubling finding is that annual corn yields in recent years are declining as planting moves into less suitable areas and more continuous corn-on-corn dampened productivity. Actual corn yields have been below trend for seven out of the last 10 years. By 2015, a corn corp of at least 15 billion bushels will be required to meet expected demand. With a crop that has never exceeded 13 billion bushels, the study questions the possibility of a 15 billion bushel corn harvest.
The study is available here.
