If EPA grants a petition to allow a 50% increase in the allowable limits of ethanol in gasoline, it will mean higher commodity costs for livestock, poultry and food producers, say two new studies released by Advanced Economic Solutions (AES) and FarmEcon LLC.

"Barring a change in government support for ethanol, if the EPA allows blends of more than 10% ethanol, our study projects that by 2015 up to 110 million acres of corn will be planted, constituting the highest number of acres planted since WWII and nearly a 20% increase over the baseline," says Bill Lapp, AES president. Current plantings are 85 million acres.

Lapp's study also examined the potential for a serious shortfall of availability in the corn market, particularly if the blend wall is raised.

"U.S. corn yields have been 7% or more below trend roughly one out of every four years. A 7% yield loss would equate to over 1 billion bu., more than the projected carryout during 2010-2015 in the E-10, E-12 or E-15 scenarios," explains Lapp, who says "raising the blend rate will exacerbate an already precarious situation in the corn markets."

Farm Econ LLC's study focused on the effects that increasing the allowable ethanol blend levels in motor fuel will have on the price of corn fed to livestock and poultry.

"As a result of the combined effect of the higher blend limits and the RFS increase, the 2010 cost of corn to the U.S. economy is forecast to increase by another $1/bu., or another $12.4 billion in total.

"U.S. biofuels policies and regulations contain inherent contradictions and have also resulted in significant economic damage to diverse sectors from inside and outside of the energy industry. Increasing the maximum blend of ethanol in gasoline, combined with higher 2010 Renewable Fuels Standard requirements, will increase cost pressures on both ethanol and food producers," says Tom Elam, president of FarmEcon LLC.

To view the AES study, go to: www.foodbeforefuel.org/files/LappE15June09.pdf.
To view the FarmEcon LLC study, go to: www.foodbeforefuel.org .

Another study released by the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri suggests allowing 15% ethanol blends would elevate corn prices by just 1.1%.View that report at: www.fapri.missouri.edu/outreach/publications/2009.
-- TCFA newsletter