The EPA announced last week that it will begin weighing requests for a suspension of the nationwide ethanol mandate, which requires that gasoline contain 10 percent ethanol. According to the U.S. Drought Monitor report released Aug. 16, 87 percent of the corn-growing areas are experiencing some degree of drought, with more than half of those areas experiencing extreme to exceptional drought. As conditions worsen, the cost of corn and other crops has skyrocketed. The crisis has prompted Democratic governors from Maryland, Delaware, North Carolina and Arkansas to join the agricultural industry in a push for a waive of the ethanol mandate.
The mandate was originally implemented to help decrease U.S. reliance on foreign oil. However, with corn in short supply, its use in ethanol is driving up food costs and lowering reserves even further.
Depending on the specifics of a waiver, corn price reduction ranges from zero to $1.30/bushel, according to a paper released Aug. 16 by three agricultural economists at Purdue University.
The economists examined how the 2012 U.S. drought may impact corn and ethanol markets and how a waiver of the federal ethanol mandate might affect those markets.
The agency has until Nov. 13 to make a decision on the waivers. PD