UPDATE 2-Georgia, New Mexico join call for end to US ethanol rule

Tue Aug 21, 2012 4:28pm EDT

* Poultry, cattle states say ethanol raising feed costs

* EPA mulling suspension of ethanol mandate

* Ethanol mandate is already flexible, says corn sector

By Patrick Rucker

WASHINGTON, Aug 21 (Reuters) - Two U.S. states that depend on the livestock industry are adding their voices to a string of states asking Washington to ease pressure on corn prices by suspending rules that send a large share of the crop to produce ethanol.

Georgia, the center of U.S. poultry production, and New Mexico, with its large cattle industry, this week asked federal officials to suspend a program that encourages converting corn into ethanol fuel.

Roughly 13 billion gallons of ethanol are due to be blended with gasoline this year under a federal renewable fuels mandate meant to bolster domestic energy sources. The rules can be waived under a formal appeal from a state to the U.S. Environmental Protection Agency.

Livestock farmers complain that demand for ethanol wrongly diverts a large share of the feed corn they need and drives up prices already inflated by a long dry season.

Poultry farmers in Georgia are spending about $1.4 million more in feed costs per day due to the drought and ethanol rules, Georgia Governor Nathan Deal wrote in a letter to the EPA that seeks a waiver of the ethanol mandate.

But corn farmers note that about a third of the ethanol-distilled corn becomes livestock feed and that the mandate has other built-in flexibilities that could be tried before shelving the program.

"Ignoring (these facts) exaggerates the impact of ethanol on corn supplies," said Matt Hartwig, a spokesman for the Renewable Fuels Association.

But livestock industry organizations are demanding total relief from the mandate.

The head of the National Chicken Council, Mike Brown, said a "full, one-year waiver" is needed to keep high corn prices from devastating the poultry industry.

In recent weeks, six states have urged the EPA to suspend the ethanol mandate, although not all of the states have formally petitioned the agency.

The EPA said on Monday that it would had begun weighing the requests to waive the mandate.

"New Mexico's agricultural economy is primarily composed of dairy and range livestock production," Governor Susana Martinez wrote in a letter to the EPA this week. "I urge you to consider granting an immediate waiver."

Ethanol is strongly supported by the renewable-fuels lobby and by lawmakers and farmers in the U.S. corn belt.

The EPA has until around mid-November to decide on the waiver requests, meaning the agency could wait to rule on the contentious issue until after national elections on Nov. 6.

The agency will collect comments from the public for 30 days as it attempts to gauge what effects the mandate will have on the economy.

After rejecting a petition from Texas Governor Rick Perry in 2008, the EPA said waiver requests have to prove that the mandate itself is the cause of severe economic harm to a region and not just a contributing factor.

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