From: Reuters
Published April 27, 2008 07:33 AM

Texas seeks U.S. ethanol cutbacks; cites corn costs

By Joan Gralla

NEW YORK (Reuters) - Texas Gov. Rick Perry on Friday asked the U.S. government to cut "skyrocketing" food prices by waiving half of the renewable fuel standard for ethanol made from grain.

The Republican governor from the oil-producing state said in a statement that such a waiver was "the best, quickest way" to ease rising food costs before lasting damage was done.

"We're diversifying our state's energy portfolio at a rapid rate, but this misguided mandate is significantly affecting Texans' family food bill," he added.

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Perry said that over the last three years, the price of corn has shot up 138 percent around the world, while global food prices rose 83 percent.

The U.S. renewable fuel standard could push corn prices to an estimated $8.00/bushel for the 2008 crop, which would double last year's price tag, Perry said. That could cost the Texas economy $3.59 billion, Perry calculated.

His spokeswoman could not say immediately whose projections he was quoting.

The governor, whose state is the biggest U.S. gasoline producer, said he appreciated the good intentions behind the federal program that aims to boost renewable fuels.

But he added: "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."

Texas is the biggest U.S. beef producer and its farms rank among the top 10 states in poultry, egg and dairy production -- and these animals eat corn-based feed, Perry said.

A Perry spokeswoman could not immediately say whether Texas was the first U.S. state to seek such a waiver from the U.S. Environmental Protection Agency. "We'd be delighted to have support from other states," another spokeswoman said.

Officials around the world have decried soaring food costs and the increasing use of grains to make biofuels. Food riots have hit several African countries, Indonesia and Haiti.

In the United States this week, Costco Wholesale Corp reported increased demand for rice and flower and Wal-Mart Stores Inc's Sam's Club warehouse division said it was limiting sales of several types of rice.

(Reporting by Joan Gralla; Editing by David Gregorio)

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