By Robert Pore

The nation’s meat and food industry is coming out with both fist flailing as Congress, under Sen. Ben Nelson, D-Neb., leadership, is seriously considering increasing the amount of ethanol allowed in motor fuel from 10 percent to 15 percent.

Nelson had introduced legislation encouraging Congress to make that move to 15 percent ethanol blend.

But meat and poultry trade groups are telling the EPA that changes to Renewable Fuel Standard could substantially effect commodity prices and hurt animal agriculture.

And in Nebraska, we are right in the middle of this debate of the state is the nation’s second leading ethanol producer behind Iowa, one of the top five states in cattle production, one of the top 10 states in pork production and the leading state in red meat production.

Opposing Nelson’s amendment are the American Meat Institute (AMI), National Turkey Federation, National Chicken Council and FarmEcon LLC. They have sharply criticized EPA’s proposed changes to the Renewable Fuel Standard (RFS), citing inadequate analysis of the proposed rule’s impact on agricultural commodity prices.

What the meat industry is saying is that EPA’s proposed regulations have not considered the risks associated with variability of grain crop or other biomass production, which would have serious consequences on food and fuel production costs in years of reduced crop production.

“Increasing the level of biofuel production in the current RFS has already resulted in a strong link between energy prices and agriculture prices,” the groups said in their correspondence with EPA. “Energy prices are highly volatile, and the link between that volatility and increased volatility of agriculture commodity prices has become a major issue facing commodity producers and users.”

According to the meat industry, that volatility has very real consequences for food producers that go beyond the increased cost levels already seen. The said that until EPA performs a risk assessment that takes into account not only average prices, but also variations around average prices, the real costs of the RFS are unknown.

AMI’s President and CEO J. Patrick Boyle said that increasing the RFS would divert even more animal feed into this nation’s fuel tanks and put continued upward pressure on corn prices.

“Further increasing the RFS will have a direct impact on the ability of livestock and poultry producers to effectively predict future annual budgets and costs due to volatility in the markets because feed is the largest single input cost associated with raising food producing animals,” said Boyle. “The net result is further disruption in the meat and poultry business and higher food prices for consumers.”

According to Farm Econ LLC, if the RFS is increased to 20 billion gallons of grain-based ethanol per year, consumers could see almost a 5 percent increase in average food costs. This estimate is based on $3,778 in food spending per capita. The impact on retail food costs as a result of higher farm commodity prices was clearly evident in 2008. Last year, one of substantial increases in grain and soybean prices, the Consumer Price Index for food increased by 5.9 percent.

Like in the cap and trade argument, that wildly inflates the cost of energy to agriculture, the argument that increasing the amount of ethanol in the fuel mix will dramatically increase the cost of food doesn’t really make a lot of sense.

The example of the increase in grain and soybean prices in 2008 was more of a result of wildly inflated commodity prices all up and down the board from food to precious metals to oil.

Oil prices were approaching $140 per barrel at the time and consumers were paying more than $4 per gallon for gasoline. It had very little to do with the amount of corn being used for ethanol production as there was no dramatic shortage of corn to drive prices up as high as they were last year when a bushel of corn hovered around $7 per bushel.

It all revolved around the cost of a barrel of oil. The whole food production industry, from agriculture to food processing to transportation, is heavily reliant of fossil fuel. That’s why food prices were so high.

The same is true with the exaggerated modeling example for cap and trade. What’s more of a danger for rising energy costs is the world’s dependence on fossil fuel not its efforts to combat greenhouse gases, which the United States contribute 25 percent of the greenhouse gas load to the atmosphere annually.

Here’s why cap and trade will make a difference in actually lowering energy costs in the long run. Less dependent we become on fossil fuels, such as oil and coal, and the more we rely on a diversified mix of energy sources, such as wind, biofuel, solar and even natural gas and nuclear energy, the cheaper energy becomes.

Same logic for ethanol, which is a transitional fuel between gasoline and future energy sources of vehicles, such as a diversified mix of biofuel, hydrogen fuel, natural gas, electrical and the list goes on. Diversify the fuel mix and increase the competition and prices will go down. That’s what the critics are saying about health insurance isn’t it. Cap and trade will increase the competition between alternative energy sources and more traditional energy sources, such as oil and coal.

Here’s the good news: According to the latest issue of the “Monthly Energy Review” by the U.S. Energy Information Administration (EIA), renewable energy sources (i.e., biofuels, biomass, geothermal, hydroelectric, solar, wind) provided 11.37 percent of domestic U.S. energy production in June 2009 – the latest month for which data has been published.

And according to EIA’s latest “Electric Power Monthly,” renewable energy sources provided 11.18 percent of net U.S. electrical generation for the first six months of 2009.

That’s according to Ken Bossong, Executive Director of the SUN DAY Campaign.

He said this continues the steady growth trend for renewable energy. Renewable energy sources accounted for 9.89 percent of domestic energy production during the first half of 2007. That increased to 10.20 percent for the first half of 2008. For the first six months of 2009, Bossong said renewables totaled 10.67 percent of domestic energy production, rising to 11.32 percent for the second quarter of this year, and edging up to 11.37 percent in June 2009.

Likewise, he said, the 11.18 percent share of net U.S. electrical generation provided by renewable energy sources for the first six months of 2009 represents a significant increase over the 9.90 percent share provided during the first half of 2008.

Moreover, Bossong said renewable energy’s contribution to the nation’s energy production is now almost equal to that provided by nuclear power, which has been holding steady in recent years at about 11 percent (11.38 percent for the first half of 2009, 11.24 percent for the first half of 2008, and 11.66 percent for the first half of 2007).

And here’s a prediction: Cap and trade will not only continue that trend, but it will accelerate it.

“As Congress debates energy funding priorities and climate legislation, it would do well to take note of the clear trends in the nation’s changing energy mix,” Bossong said. “Renewable energy has become a major player – growing rapidly and nipping at the heels of nuclear power – while fossil fuel use continues to drop.”

The unintended consequences of those fighting against increasing ethanol use and cap and trade is the fact we will become even more dependent on fossil fuels, which will dramatically increase of the price of those finite fuels, and continue to increase the amount of greenhouse gases in the atmosphere accelerating global warming and climate change.

And guess what, increasing the amount of ethanol in the nation’s fuel mix and a reasonable designed cap and trade bill will only keep that alternative fuel momentum going strong and, in the long run, lower energy cost and make the U.S. more economically sound and defensively strong.