Setting Aside the Renewable Fuel Standard Will Not Reduce Corn Prices

Business Wire, June 24, 2008

BIO Opposes Texas Petition to EPA for Waiver of RFS

WASHINGTON -- Biofuels are needed to help reduce fuel prices, which are the root cause of higher food prices, according to the available evidence. The Biotechnology Industry Organization today submitted comments to the U.S. Environmental Protection Agency (EPA) opposing Texas Gov. Rick Perry's (R) request for a waiver of 50 percent of the Renewable Fuel Standard (RFS) mandate for production of ethanol from grain.

BIO President and CEO Jim Greenwood said, "Texas has not demonstrated in its petition to the EPA that the higher costs for corn currently impacting its livestock and agriculture industries are the result of biofuel production. In fact, Texas' own study of the problem shows that the soaring cost of oil is the primary cause of higher agricultural costs and food prices and that relaxing the RFS will not lower corn prices.

"The RFS is designed to move the United States as rapidly as possible toward sustainable production of advanced biofuels. Abandoning the RFS today would send a signal to the market that could undercut ongoing research and development in biotechnology that is vital to achieving that goal."

An April study by the Agricultural & Food Policy Center at Texas A&M University, cited by Texas in its petition to the EPA for a waiver, demonstrates that higher energy costs have had the most significant impact on food and grain prices by increasing the cost of production. Further, the study clearly shows that demand for biofuels is outpacing the Renewable Fuel Standard's mandate, due to increased fuel prices and state and federal requirements for clean fuels. The analysis concludes that relaxing the new RFS and reducing production of biofuels would not lower grain prices. The study is available at http://www.afpc.tamu.edu/pubs/2/515/RR-08-01.pdf.> That conclusion is supported by further evidence, such as the testimony of Bruce A. Babcock of Iowa State University's Center for Agricultural and Rural Development before the U.S. Senate Committee on Homeland Security and Government Affairs on May 7, 2008. Babcock testified that eliminating the RFS would produce a 1 percent drop in the price of corn. He presented two general findings to the committee, saying that the price of corn will continue to rise and fall directly with transportation fuel prices and that "if high gasoline prices signal that we need alternative fuels, the corn ethanol industry will be there to contribute substantial amounts of transportation fuels even without government subsidies." The testimony is available at http://hsgac.senate.gov/public/_files/050708Babcock.pdf.> Both U.S. Agriculture Secretary Ed Schafer and Council of Economic Advisors Chairman Ed Lazear have stated that ethanol production accounts for less than 3 percent of the increase in global food prices. Further, a Merrill Lynch analyst recently estimated that U.S. oil and gas prices would be 15 percent higher without biofuel production.

The Advanced Biofuels & Climate Change Information Center presents the latest commentary and data on the environmental and other impacts of biofuel production. Drop in and add your comments, at http://biofuelsandclimate.wordpress.com/.> BIO represents more than 1,200 biotechnology companies, academic institutions, state biotechnology centers and related organizations across the United States and in more than 30 other nations. BIO members are involved in the research and development of innovative healthcare, agricultural, industrial and environmental biotechnology products. BIO also produces the BIO International Convention, the world's largest gathering of the biotechnology industry, along with industry-leading investor and partnering meetings held around the world.

-- Pacific Rim Summit on Industrial Biotechnology and Bioenergy
Sept. 10-12, 2008
Vancouver, BC

-- BIO Investor Forum 2008
October 29-31, 2008
San Francisco, CA

-- BIO-Europe 2008
November 17-19, 2008
Mannheim/Heidelberg, Germany