Ethanol move seen prompting price volatility in grain markets

by Editorial Staff
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WASHINGTON — A decision by the Environmental Protection Agency to allow the sale of gasoline containing 15% ethanol for cars made in the 2007 model year or later has drawn vigorous opposition from the American Bakers Association.

“E.P.A.’s decision to increase the ethanol blend to E15 will further increase volatility in the grain markets,” said Robb MacKie, president and chief executive officer of the A.B.A. “Other grains, including wheat, may increasingly be in shorter supply; potentially this may impact food prices in the future as the nation continues to lose wheat acreage. A.B.A. strongly opposes this ill-advised decision and calls on E.P.A. to consult with relevant government agencies to carefully study how this would impact market volatility, to review the science behind the decision and analyze the economic impact on the already weakened economy.”

The A.B.A. warned that already the United States has a finite area cultivable for farming.

“Where will the land come from to grow more food crops as well as to meet new ethanol mandates?” the bakers asked.

On Oct. 13, the Environmental Protection Agency granted a partial waiver to Growth Energy allowing fuel and fuel additive manufacturers to introduce into commerce gasoline with 10% to 15% ethanol (E15) for use in certain motor vehicles once certain other conditions are fulfilled.

The decision was made after review of extensive testing by the Department of Energy (D.O.E.) and other available data on the impact of E15 on engine durability and emissions, said Gina McCarthy, E.P.A. assistant administrator for air and radiation. Prior to the E.P.A.’s decision, only a blend of up to 10% ethanol was allowed in gasoline.

Model year 2007 and newer vehicles represent one-third of the country’s gasoline consumption, Ms. McCarthy said. That percentage is expected to increase rapidly to more than 100 million cars and 50% of fuel consumption by 2015.

The E.P.A. will make a decision on vehicle model years 2001-06 after receiving the results of ongoing tests from the D.O.E. The testing is expected to be completed in November, Ms. McCarthy said.

The agency also made it clear that its decision is not a mandate, but simply a waiver allowing the use of E15 where and when it is available. It will be up to fuel suppliers and retailers to make the fuel available.

Ms. McCarthy said even though E15 is only a 5% increase from the current blending level, it amounts to a 50% increase in the amount of renewable fuels in a gallon of E15 as compared to E10.

“It is important to remember that there are a number of additional steps that must be completed — some of which are not under E.P.A. control — to allow the sale and distribution of E15,” the agency said. “These include but are not limited to submission of a complete E15 fuels registration application by industry, and changes to some states’ laws to allow for the use of E15.”

Rasma Zvaners, policy director at the A.B.A., acknowledged that many factors contribute to commodity price volatility. Still, she warned that government policy urging ethanol production is an important factor.

“Taking food crop acreage and turning it into fuel crop acreage may lead to tighter food supplies, higher grocery store prices for consumers, and a dependence for food commodities from foreign countries — a position of concern with regard to food security,” Ms. Zvaners said. “A.B.A. supports research to develop efficient alternative fuels. However, these policies must be balanced with the needs of traditional agriculture to ensure a reliable food supply for our nation.”

The A.B.A. is part of a coalition opposing the move that also includes the American Meat Institute, the Grocery Manufacturers Association, the National Council of Chain Restaurants, the National Chicken Council, the American Frozen Food Institute, the National Meat Association and the National Turkey Federation.

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