President Joe Biden issued an emergency waiver that allows gasoline stations nationwide to sell gasoline with 15 percent ethanol. With the record-high prices and soaring levels not seen since 1981, Biden effectively paused a federal environmental regulation that prohibits this biofuel mixture in the summer to limit smog.
Biden's action, however, could lead to higher meat prices due to the increased demand for corn.
Heritage Foundation senior research fellow Daren Bakst said this would certainly drive up food prices and hurt meat producers who rely on feeds. Corn and soybean meal is used to feed livestock and serves as the largest cost for chicken producers.
"Further and artificial demand for corn created by this administration will likely increase the cost of corn and all food products dependent on corn and corn oil inputs," said National Chicken Council President Mike Brown.
"What it does at the gas pump we shall see … but at what expense to consumers in the grocery store who are already dealing with the highest inflation in 40 years?"
At the end of the day, Brown said ethanol manufacturers win and consumers lose.
Overall inflation increased 8.5 percent year-over-year in March, the highest such jump in over 40 years as per federal data. Food prices surged even higher at a rate of 8.8 percent between April 2021 and March 2022, the largest 12-month increase since 1981. (Related: Inflation surges by 8.5% to 40-year high, disproving White House claims it wouldn't go higher than 2.2%.)
The price of corn, however, has surged 37.8 percent from $3.97 to $5.47 per bushel between December 2020 to December 2021, and corn futures have surged more than 44 percent relative to their December price in the wake of Biden's announcement.
Long-term solution needed, not short-term political fixes
A representative of the oil industry also criticized the Biden administration for the decision. Ron Chit, a spokesman for the American Petroleum Institute, said Americans are looking for long-term solutions and not short-term political fixes.
Heartland Institute President James Taylor said: "Burning food for fuel makes no sense at all when the Biden administration and others warn of widespread upcoming food shortages as a result of the Russian invasion of Ukraine." He also mentioned that it's as if the Biden administration is deliberately calculating how to make food-price inflation worse.
The Ukraine crisis has already triggered a global food supply shortage that experts believe could still worsen. Meanwhile, the National Cattlemen's Beef Association (NCBA) previously characterized the 2005 renewable fuel standard program as a government policy that is picking one industry over the over. It mandates that energy providers replace a certain amount of petroleum-based products with renewable fuel, including ethanol.
Some groups are in favor of Biden's action, however, saying criticism from meat groups was a "red herring" and that it would have little impact on corn supplies.
At present, there are more than a billion gallons of ethanol in storage and farmers still intend to plant 89.5 million acres of corn in 2022.
Andrew Walmsley of the American Farm Bureau said this is not a "one or the other" issue, adding that the United States has the resources to produce homegrown, renewable fuels while also meeting the demand of ensuring there is food on the table and that livestock are fed.
Moreover, according to Walmsley, the Ukraine crisis and supply chain issues are the main culprits for higher global food prices. (Related: Russia-Ukraine war will further worsen global food shortage as poor nations face starvation, unrest.)
"The amount of corn needed to meaningfully expand E15 this summer is minuscule," said Troy Bredenkamp, senior vice president for government and public affairs at the ethanol advocacy group Renewable Fuels Association. He also mentioned that the amount of corn needed to double the current E15 use is equivalent to only 0.3 percent of last year's corn crop.
The impact of the E15 waiver on grain markets would essentially be undetectable, but the impact on pump prices could be substantial, said Bredenkamp. "While every additional gallon of E15 sold will help relieve very tight fuel supplies, especially as the summer driving season gets into full gear, clearly there will only be a slight incremental effect on corn prices and no change in U.S. retail food prices."
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