Governor Perry seeks relief from skyrocketing food prices

Governor Rick Perry (photo)

Seeking immediate relief from skyrocketing food costs, Gov. Rick Perry asked the federal government for a 50 percent waiver from the federal renewable fuel standard (RFS) mandate for ethanol produced from grain.

"We appreciate the good intentions behind the push for renewable fuels. In fact we’re diversifying our state’s energy portfolio at a rapid rate, but this misguided mandate is significantly affecting Texans’ family food bill," said Gov. Perry. "There are multiple factors contributing to our skyrocketing grocery prices, but a waiver of RFS levels is the best, quickest way to reduce those costs before permanent damage is done."

Corn prices rose 138 percent globally over the last three years and global food prices increased 83 percent over the same time period. With the implementation of the new RFS mandate, some estimates predict corn prices will rise to $8 bushel for the 2008 crop, resulting in a negative impact of $3.59 billion to the state.

While well-intentioned, the RFS mandates the levels of renewable fuel usage regardless of market signals. The artificial demand for grain-derived ethanol is devastating the livestock industry in Texas and needlessly creating a negative impact on our state’s otherwise strong economy while driving up food prices around the world. Overall, the Texas economy is the strongest in the nation, primarily because of market-driven policies.

Texas plays a significant role in feeding and fueling the nation. Not only is our state the nation’s largest beef-producer, Texas also ranks in the top 10 states in poultry/egg and dairy production, which rely heavily on corn-based products for feed. Texas is also a leading producer of the nation’s domestic fuel supply.

The impact on the cattle industry is particularly harmful to family ranches. According to the USDA, two-thirds of the 149,000 cattle producers in Texas have fewer than 50 head of cattle. Granting this waiver will provide all Texans much needed relief at the grocery store, and it will enable the Texas livestock industry to continue providing its significant share of our nation’s food supply.

In 2007, 25 percent of the U.S. corn crop was diverted to produce ethanol, according to the United States Department of Agriculture, which projects that 30 to 35 percent will be diverted in 2008. With ever increasing mandates of corn crop diversion to ethanol production through 2015, the impact on food prices globally, and to Texas specifically will only worsen.

The RFS program was established by the federal government through the Energy Policy Act of 2005. It was amended in 2007 by the Energy Independence and Security Act, which increased the RFS mandate.