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afia@afia.org • www.afia.org July 20 , 2012

The Honorable Barack Obama VIA ELECTRONIC MAIL

President of the United States 1600 Pennsylvania Avenue, NW Washington, D.C

. 20500

Re: Ethanol Blending Mandate, Renewable Fuel Standard

Dear President Obama:

I write on behalf of the membership of the American Feed Industry Association (AFIA) to urge you in the strongest possible manner to request EPA Administrator Lisa Jackson consult with Secretary of Agriculture, Tom Vilsack, and Secretary of Energy, Steven Chu, to give urgent cons ideration to waiving the current ethanol blending mandate under the Renewable Fuels Standard (RFS) at the earliest date possible.

Our rationale for this urgent request is simple: The national priority on our current food security must be at least as high as the priority placed on future energy security.

AFIA is the world’s largest organization devoted exclusively to representing the business, legislative and regulatory interests of the U.S. animal feed/pet food industry and its suppliers. Founded in 1909

, AFIA represents the total feed industry, a $45

- billion U.S. industry, with $15

- 20 billion spent annually on domestic ingredients alone. AFIA’s members include more than 525 companies and state, regional and national associations. Member companies are ani mal feed and pet food manufacturers, livestock and poultry integrators, pharmaceutical companies, ingredient suppliers, equipment manufacturers and companies which supply other products, services and supplies to feed manufacturers. The U.S. feed industry p lays an obvious critical role in the production of healthy and wholesome meat, milk, fish and eggs and has a long history of providing safe ingredients and animal feed for use domestically and for export.

A simple equation connecting the farmer’s field t o the price of meat, dairy and poultry products must be understood. Livestock and poultry feed represent up to 70% of the cost of producing this nation’s meat, milk and eggs. Any negative influence on the cost of feed represents an increase in the cost o f

on

- farm food production; that cost increase is transmitted up the food chain, negatively impacting all components and is ultimately paid by the consumer.

AFIA was extremely disappointed to hear Secretary Vilsack this week again state there is no reason

f or the Administration to consider waiving all or part of the ethanol RFS mandate. “There’s no problem in that area at this time,” the Secretary is quoted. Given the Secretary’s statement relative to ethanol currently in storage, and the fact the U.S. indus try exported 1.2 billion gallons in the last2101 Wilson Boulevard, Suite 916, Arlington VA 22201 USA
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afia@afia.org • www.afia.org year, we concur the ethanol industry is in good shape. However, AFIA submits that it is one thing for the Secretary to continue to state “we’re on track” to produce this country’s third largest corn

crop; y et, it is quite another to face the agronomic reality this country is very likely not going to have a crop even approaching what the Secretary anticipates.

The Energy Policy Act of 2005 (EPAct) created the RFS and the Energy Independence & Security

Act o f 2007 (EISA) expanded the mandates for blending alternative fuels with gasoline. These mandates increase the demand for biofuels exponentially. Of and by itself, the development and production of domestic alternative fuels is a net positive for the U.S., and AFIA strongly supports the continued development of alternative fuels which use feed stocks which do not compete with food

and feed.

However, this “perfect storm” of negative conditions

– already

- tight supplies, extensive drought and arbitrarily incre ased competition for available corn

– is exactly what livestock/poultry farmers and input suppliers warned Congress would happen in 2005 when it locked in the rigid RFS mandate. At that time, the mantra was: “We’re one drought away from disaster.” Regrett ably, we were correct.

As amended by EISA, section 211(o)(7) of the Clean Air Act gives the EPA Administrator authority to waive, in whole or part, the total volume of renewable fuel mandated by the RFS is inadequate to

meet the mandate

– hardly an issue given Secretary Vilsack’s statement there is ample ethanol in
storage

– or if “implementation of the requirement would severely harm the economy or environment of a State, a region or the United States.”

AFIA submits the second criterion has been met

– in spades. A temporary waiver of the RFS mandate for the blending of ethanol with motor fuels

– the vast majority of this biofuel currently

refined from corn

– is immediately necessary to mitigate the increasing devastation of the current Midwestern droug ht

– the worst experienced in half a century

– on corn production. Nearly 50% of the crop is already rated poor to very poor; with over 60% of the continental U.S. in moderate to exceptional drought. USDA reports 1,297 counties in 29 states now carry “natu ral disaster” designation

– with corn and soybean crops hit the hardest.

With ethanol production consuming over 40% of the 2011 corn crop, the U.S. corn stocks

- to

- use ratio is reaching historical lows. Combine low stocks with drought

- reduced production and corn prices are already 21% higher than a year ago. Reuters reported, Chicago Board of Trade (CBOT) corn prices h ave soared nearly 50% in just six weeks to a record high $8.08

- 1/2 per bushel on July 19, smashing the previous record of $7.99

- 3/4 set 13 months ago. Given the 10

- day weather forecast shows little hope for precipitation across the Midwest, analysts are fo recasting $10

- 12

- a

bushel corn by harvest, with soybean prices exceeding $20 a bushel.

AFIA is a strong supporter of a House bill

– the “Renewable Fuels Standard Flexibility Act” (H.R. 3097)

– authored by Reps. Jim Costa (D

- Calif.) and Bob Goodlatte (R

- V a.), with 30 bipartisan

cosponsors, that takes a pragmatic approach to mitigating the situation the country current faces and2101 Wilson Boulevard, Suite 916, Arlington VA 22201 USA
Telephone (703) 524

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- 1921
afia@afia.org • www.afia.org will very likely face aga in in the future. The Goodlatte/ Costa bill would require a biannual review by EPA and USDA of ending corn stocks relative to total use. If the ratio falls below 10%, the RFS could be reduced by 10%. If it falls below 7.5%, the mandate could shrink by 15%; below 6%, it could be reduced by 25%, and if the ratio falls below 5%, the ethanol mandate could be c ut by 50%. All of this could be achieved without negatively impacting the RFS per se over time.

Just this week, AFIA, in cooperation with The Council on Food, Agricultural & Resource Economics (C

- FARE) released a landmark report entitled Future Patterns of U.S. Grains, Biofuels, and Livestock and Poultry Feeding . Dr. Robert Wisner, University Professor Emeritus, Department of Economics, Iowa State University, Ames, Iowa, was the principal investigator

. The analysis includes an economic outlook of how industry profitability, production efficiency and demand will be impacted by changes in U.S. feed grains production, as well as shifts in livestock and poultry

fee ding

. This report points out clearly the three main factors impacting feed availability and cost are : biofuels, global demand / exports and annual crop yields . There are several additional independent studies that concur with the ethanol impact on livestoc k and poultry production in the U.S.

All of this being said, it is simply not enough to say Congress must act to minimize the negative impact of the current drought and the disproportionately negative feed ingredient and food price impacts of panicked corn markets. It is imperative the White House preempt, or at the very least minimize to the extent possible, the ultimate negative impact of the current drought.

The Administration has tools, most notable the RFS waiver, but it must choose to use those tools today, not in three months.

AFIA respectfully urges the Administration to immediately use all authority available to mitigate this impending economic disaster; it must choose to act before the wolf is at the door, not when it’s clawing its way inside. AFIA stands ready to work with the Ad ministration in any way necessary. Please do not hesitate to have your staff call on us.

Sincerely,

Joel Newman

President & CEO American Feed Industry Association