President misses mark on livestock aid
Updated: Friday, September 21, 2012 11:30 AM
Last week President Barack Obama went to Iowa to announce the USDA will buy $170 million worth of pork, lamb, chicken and catfish to relieve pressure on drought-stricken livestock producers.
The government plans to buy $100 million in pork, $50 million in chicken, and $10 million each of lamb and catfish for use in federal food assistance programs. The government doesn't plan to buy beef.
The USDA said it hadn't done an analysis of how the purchase will impact markets. Economists interviewed by the Capital Press said the impact on market prices would be, at best, small and short-lived. The real problem facing livestock producers -- and dairymen -- isn't price. It's the high cost of feed.
If the president really wants to help livestock producers and dairymen, he should waive the Renewable Fuel Standard, a feature of the Energy Independence Act of 2007 that requires that up to 13.2 billion gallons of corn-based ethanol be blended with gasoline this year.
Dairymen, livestock producers and feedlot owners say the law has pushed up the price of all feedstuffs, making it increasingly difficult for them to turn a profit. The drought has only made things worse.
The Renewable Fuel Standard has been good for Midwestern corn growers. The USDA says that in the decade before the standard was enacted, corn prices averaged $2.15 per bushel. Prior to the drought, the USDA predicted the RFS would keep corn prices in the $4 to $5 a bushel range at least through 2020. That boon comes on top of generous government commodity payments doled out to corn growers.
Ethanol producers buy 40 percent of the U.S. corn crop. Because demand is guaranteed by government mandate, they can afford to bid up the price to get the corn they need, passing the cost along to the blenders.
The Midwestern drought has put 30 percent of the corn crop at risk, according to the USDA. That's pushed corn prices into the $8 a bushel range this summer. That, in turn, has increased the price of alternative feeds.
Last month, 19 livestock and dairy groups asked the director of the Environmental Protection Agency to waive, or a least reduce, the mandate until next year's corn crop is in the bin. A bipartisan group of 156 House members and 25 senators followed suit in separate letters this month.
The ethanol industry and the corn growers are naturally opposed to any attempt to lift or reduce the mandate. The RFS enjoys bipartisan support among Corn Belt legislators, and from USDA Secretary Tom Vilsack, a former two-term governor of Iowa.
The president, who faces re-election with several Midwestern swing states in play, arrived in Des Moines with an aid program designed to court Iowa hog farmers and not offend Iowa corn growers.
Too bad. The losses of corn growers will be offset by crop insurance, coverage not extended to livestock producers or dairymen. They would be better served by a break in feed prices.