Smithfield CEO calls for US to cut ethanol mandate


The chief executive of Smithfield Foods, the world's largest pork producer, is calling for the US government to waive its mandate requiring the blending of ethanol into the nation's gasoline supply as a worsening drought batters the nation's corn crop and drives up prices.

In addition to a temporary waiver of the mandate, Congress should pass a bill that would lower the federal Renewable Fuels Standard when US corn supplies fall below a certain threshold, Smithfield CEO C. Larry Pope wrote in an editorial in The Wall Street Journal on Friday.

Smithfield buys roughly 128 million bushels of corn and corn equivalents each year to feed its hogs, making it one of the largest consumers of the grain in the US, Mr. Pope said.

Livestock and poultry producers are longstanding foes of the ethanol industry, which now consumes roughly 40% of the US corn crop.

Producers of the corn-based fuel additive argue that it returns much of that back to livestock producers in the form of distillers dried grain, an ethanol byproduct that is used as feed.

But as corn prices have soared to record highs this month, the livestock industry has intensified its criticism of ethanol.

“We can't control the drought. But we can and must address the impact of politics on corn supplies and prices by taking steps to ease the pressure and help prevent food inflation,” Mr. Pope said.

A waiver would ease requirements that refiners blend ethanol with gasoline. Livestock producers argue the mandate props up corn demand regardless of how high corn prices climb, artificially inflating the market.

Mr. Pope also said he supported a bipartisan bill that would automatically reduce the ethanol mandate when corn stockpiles, as a percentage of total usage, fall below a certain level. The bill was introduced by US Reps. Bob Goodlatte (R-Va.) and Jim Costa (D-Calif.).

The Renewable Fuel Standard requires 15.2 billion gallons of ethanol, most derived from corn, be blended into gasoline this year. Mr. Pope called that figure “arbitrary.”

Last week, US Agriculture Secretary Tom Vilsack said the drought puts livestock producers “in deep trouble.” However, he said the situation wasn't bad enough to warrant a reduction in government mandates for corn-based ethanol production.

“There's no need to go to the EPA [Environmental Protection Agency] at this point, based on the quantity of ethanol that's currently in storage,” Vilsack said at a White House briefing on July 18. "There's no problem in that area at this point in time."

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