LINCOLN, NE  –  (audio links below this print version)

The ethanol hearing to be hosted by Senator Ben Nelson and Senator Tom Harkin August 18 at the University of Nebraska – Omaha is a great opportunity to hear all sides of the energy debate. Unfortunately, very little livestock input will be heard from the panel as there is only one representative of any livestock entity, Dave Moody, president of the Iowa Pork Producers. Nebraska’s largest industry, Beef, has not been invited to speak, but we feel it is critical for the public to understand our position on this debate, said Michael Kelsey, Nebraska Cattlemen executive vice president.

Renewable fuels are very important to the Midwest, and the nation as a whole. There is great opportunity for synergistic relationships if markets are allowed to work. However, many believe that the only way to develop renewable fuels is to mandate their production and use. The most popular and harmful mandate is the Renewable Fuels Standard. Mandating production and usage has never been good over the long term for any industry, for several reasons, Kelsey said.

First, it promotes inefficiency by forcing products into the market. That is not to imply that the ethanol industry has not made improvements. However, incentives to improve your product are stronger and better long-term when they are demanded by your consumer rather than guaranteed by government, he said.

Second, mandated production artificially sets a demand for the raw product that is unfair to other users of that raw product. Ethanol from corn is an established technology and demand should determine how much is produced, not the government. The RFS next year will require approximately 3.5 billion bushels of corn, which is nearly 30 percent of what is currently grown in the U.S. Remember that the RFS is a mandate, meaning the 3.5 billion bushels of corn must be used to produce fuel and cannot be used for food, feed or export. If the ethanol industry were required to compete for corn, as are all the other users, then the supply of corn would be allocated by market forces rather than government control, Kelsey added.

Third, the RFS is building an industry that cannot be flexible or responsive to market forces. What happens if corn, ethanol and crude prices are at levels that make ethanol unprofitable? If the RFS is enforced, they will produce at a loss. Wouldn’t it be better if ethanol plants could adjust production when the market tells them to?

Finally, the RFS does not promote a working relationship between industries, rather it forces a relationship. Free-market production of beef offers a good template for ethanol. Rather than mandate that packers produce the flat iron steak, for example, cattle producers promoted the concept and product to consumers who then purchased the new product. Packers now have consumer demand driving their production of the flat iron, not a government mandate. We believe this is a long-term sustainable demand as consumers are building affinity for the flat iron.

Nebraska Cattlemen is a strong supporter of diversified renewable fuel research and development. We are not asking for cheap corn, rather we ask that all Nebraskans be allowed to operate in a free economy that will produce the best products for our fellow citizens. We believe that cattle, corn and ethanol working together can be a great opportunity for Nebraska provided the playing field is fair, Kelsey said.

(Audio links begin here)

Nebraska Cattlemen Speak About Monday's Renewable Fuels Hearing Topic

(Michael Kelsey is executive vice president of the Nebraska Cattlemen.)

Listen to the full interview here