Remember that old rule-of-thumb about corn: knee high by the Fourth of July? In most places, it was scarcely ankle high and too much of it was just plain dead. USDA kept surveying fields and dropping their crop estimates. At first, they predicted only a slight decline; with our strong reserves, they hoped, there was nothing to get overly excited about.
When the enormous scope of the dreaded drought of 2012 was finally understood, those corn crop estimates shrank faster than the economy in ’08. Recent reports say that as much as 90% of all corn and soybean crops are in drought areas and over half of U.S. counties are in drought disaster areas. In many countries, those numbers could lead to massive famine. In this country, the price of corn went sky high, resembling the ascent pattern of an old-fashioned Saturn rocket.
The price of a bushel of corn had quadrupled in the last decade. According to the just released August USDA crop report, corn is projected to reach nearly $9.00 per bushel, up sharply from the $5.40 to $6.40 projections in July, a one month jump of somewhere around 50%.
Take a look at the Trading Charts Weekly Commodity Futures Price Chart for corn.
Understanding that corn has two basic uses – food and fuel – the National Pork Producers Council took the lead in petitioning EPA Administrator Lisa Jackson for temporary relief from the Renewable Fuels Standards that consumers more than a third of the crop. NPPC, pressuring her to tilt the table toward food, requested “that you utilize your authority under the federal Renewable Fuels Standard (RFS) to waive the applicable volume of renewable fuel, in whole or in substantial part, for the period of one year pursuant to section 211(o)(7) of the Clean Air Act (“CAA”) (42 U.S.C. § 7545(o)(7)).” For good measure, the petition was also sent to USDA Secretary Tom Vilsack, Department of Energy Secretary Steven Chu and Director, Office of Information and Regulatory Affairs, Cass Sunstein.
To understand the financial forces at play here, corn is the biggest single crop produced in the United States. The USDA estimates that about 70% of our annual crop is used for either animal feed or ethanol, split evenly between those two markets. We’re talking billions of dollars on the table and some of the most formidable of Washington’s heavy hitters can be expected to pull up a chair and start grabbing at the old money pot.
The warring factions are divided into two groups; NPPC and friends who petitioned for relief and those RFS fans who think things are just find as-is. On the ‘grant us relief’ side, the NPPC petition was co-signed by these ag industry associations:
- American Feed Industry Association
- American Meat Institute
- American Sheep Industries Association
- California Dairy Campaign
- Dairy Producers of New Mexico
- Dairy Producers of Utah
- Idaho Dairymen’s Association
- Milk Producers Council
- National Cattlemen’s Beef Association
- National Turkey Federation
- Nevada State Dairy Commission
- North American Meat Association
- Northwest Dairy Association
- Oregon Dairy Farmers Association
- Southeast Milk, Inc.
- United Dairymen of Arizona
- Washington State Dairy Federation