Soaring food prices have shaken U.S. politicians' love affair with ethanol, but lawmakers are unlikely to adjust mandates for a five-fold boost in biofuel until after the November presidential election.
Renewable fuels made from corn and other crops were once seen as the panacea for an impending U.S. energy crunch, both in Congress and the White House.
But cattle, hog and chicken farmers who have seen feed prices skyrocket, as well as grocery store chains and restaurants, have sought to cast the fuel as the political boogeyman for soaring prices at the supermarket.
Some U.S. politicians are now calling for Congress to rethink legislation it passed last year that would require U.S. gasoline supply to include 36 billion gallons of renewable fuels by 2022.
At least one U.S. senator, Kay Bailey Hutchison (R-Texas), is seeking to freeze the mandate at 2008 levels of 9 billion gallons.
That's after the governor of Texas -- whose state is the biggest U.S. cattle producer -- asked the federal government to waive half of its mandated ethanol requirement for 2008.
THE THIRD RAIL
After the election, lawmakers could become braver and water down the renewable fuel use mandates, analysts said. The Environmental Protection Agency, which has jurisdiction over the rules, could also exercise authority to waive requirements or even write new, less stringent rules.
But ethanol has become the third rail of U.S. election-year energy policy, and Congress is unlikely to fiddle with ethanol mandates during a presidential election year.
Lawmakers are loath to alienate the 10 Corn Belt states that together control about one quarter of Electoral College votes.
The political support base for ethanol is a numbers game and it's one that no right-thinking national party planner can ignore, said Kevin Book, senior analyst at Friedman, Billings, Ramsey and Co Inc.
And President George W. Bush, who has described himself as an ethanol person, is unlikely to move much from his long-standing support for home-grown fuel supplies, analysts said.
Bush sees ethanol as a welcome alternative to the oil imports that satisfy over 60 percent of daily U.S. consumption. It makes sense for America to be growing energy, Bush told a crowd in St. Louis on Friday.
Though the ethanol mandate has contributed to rising food prices, I simply do not subscribe to the notion that it is the main cost driver for your food going up, he said.
Powerful Corn Belt lawmakers are sure to fight vociferously to defend the so-called Renewable Fuels Standard, a boon to their farmers and big agribusiness concerns like Archer Daniels Midland, Cargill Inc and Bunge Ltd .
But a growing coalition of anti-ethanol interests, including cattlemen, restaurateurs, grocery sellers and big poultry concerns like Perdue, could be enough to eventually tip the balance toward watering down the requirements, analysts say.
Analysts at Bernstein Research this week pointed to increased disillusionment with U.S. biofuel use and predicted that lawmakers will tweak the requirements before 2022.
A more likely scenario would be for the EPA to issue a waiver of the rules, Bernstein said.
Meanwhile, big ethanol producers pin the blame for soaring food prices squarely on the OPEC oil cartel and crude oil prices, which hit a record near $120 a barrel this week.
Attempts to jettison the still-growing biofuel industry because of misplaced blame would relegate America and the world to more of the same, said Bob Dinneen, president of the Renewable Fuels Association, which lobbies for big U.S. ethanol producers.
THE CORN FLAKES KID
At a news conference on Thursday, Republican Sen. Chuck Grassley of Iowa, the biggest U.S. corn-growing state, showed up armed with an ear of corn and a family-sized box of Corn Flakes which he said he had bought that morning for $5.
Grassley, one of the primary authors of the renewable fuels plan, said farmers would only reap about a dime in profit from a box of cereal.
Don't be blaming the farmer and ethanol for the high price of food, Grassley said.