Updated 08/16/2012 07:44 PM
Corn prices could cost consumers as EPA weighs ethanol mandate
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RALEIGH — Bad drought conditions in the mid-west could mean higher prices when people head to the grocery store in North Carolina.
Top state officials are asking for federal rules to be relaxed about ethanol use, in order that corn will not be in such high demand and leading to high prices.
“This is the most severe drought event in 50 or 70 years, 25 percent reduction in supply and it could have very severe impacts,” said N.C. State University agricultural economist Dr. Kelly Zering.
The conditions are leading to severe impacts from the gas pump to the poultry supply.
“[Corn is] the largest feed ingredient, and feed is the largest share of cost, perhaps 70 percent in raising these animals. And corn makes up 70 to 80 percent of the diets depending on what type of animal it is,” said Zering.
This week, Gov. Bev Perdue sent a letter to the Environmental Protection Agency saying the lack of corn supply due to the drought "has imposed severe economic harm to my state's swine, poultry, dairy, and cattle producing regions." Gov. Perdue has asked the EPA to consider relaxing the Renewable Fuel Standards (RFS) which requires a certain percentage of gasoline contain ethanol, which is made from corn.
State agriculture officials say ideally there would be a solution to help both corn and meat producers.
“So that we're not seeing one segment of our agricultural economy harmed at the benefit of another sector of our ag economy,” said Brian Long with the N.C. Department of Agriculture.
Higher corn prices means good news for North Carolina farmers who are having a good crop this year. But bad news for meat producers, and bad news for consumers who could see up to 8 percent higher meat costs. Economic experts say it is unlikely if the ethanol restrictions were relaxed that gas prices would climb at the same rate as livestock costs will.
“You would see very little effect because ethanol is a very small amount of gasoline supply,” said Zering.
Other governors have made requests similar to Perdue's as well as members of Congress, including North Carolina officials.
In a statement to News 14 Carolina the EPA said:
We are in close contact with USDA as they and we keep an eye on crop yield estimates, and we will review any data or information submitted by stakeholders, industry and states relating to the RFS program.