Opinion: How the EPA can stop food inflation from getting worse

The Environmental Protection Agency (EPA) recently suggested that a proposed update to the Renewable Fuel Standard (RFS) would harm America’s food supply chain and raise prices higher for consumers.

In the proposal, the EPA recommends a sharp increase in mandatory volume levels for advanced biodiesel, a biofuel based largely on the same commodity used by nearly every human and pet food company in the United States: soybean oil.

If the motion is finished as is, there will not be enough soybean oil. Over the past year, before the Environmental Protection Agency released its proposal, competition for soybean oil between biodiesel refiners and food makers has been fierce, with food producers often outbidding and out of supply for this ingredient. Small and medium-sized food companies have been particularly hard hit. If the agency’s plan is not changed, food makers, food retailers and food service entities that depend on their products could be downright out of luck.

Results? Fewer products are on grocery shelves, restaurants, and kitchens across America. Federal nutrition programs, pantries, and hunger groups will face even greater challenges. It is entirely possible that consumer prices for basic commodities will be very expensive, as at two to three times the current prices. On top of that, Americans are more likely to see bread, crackers, snacks, sauce, shelves of low-stock frozen foods, and even more “out of stock” signs in restaurants. Soybean oil is simply irreplaceable in the food supply chain as it exists today.

Hard-working American farmers have seen the best yields of soybean crops in years, but demand for soybean oil — driven in part by the steadily increasing RFS mandate — has far outstripped domestic soybean oil refining capacity. Already, nearly half of US soybean oil goes toward biofuel production, and that percentage is only expected to grow. The US Department of Agriculture predicts that the amount of soybean oil used to make biofuels will increase by 25% over the next year.

Biodiesel refineries are building new refining capabilities, but it will take years for these new facilities to be operational. In the meantime, biodiesel refineries must follow the EPA’s RFS dictates and produce a mandatory level of biofuel even if it means soybean oil is not available for food, which is exactly what is happening. As a result, food manufacturers have had to import soybean oil from abroad, which is very expensive due to exorbitant tariffs (19.1%). The United States has long been able to meet our domestic soybean oil needs, but unfortunately and alarmingly, it became a net importer of soybean oil in September and October of 2021.

For several months now, we in the food industry have sounded the alarm to government officials about the acute shortage of soybean oil supplies. When the EPA apparently ignored our pleas and proceeded to issue an RFS advanced biofuel class authorization that represents a nearly 13% jump for 2022 compared to 2021, we were shocked. Under the RFS Act, the EPA is obligated to take current market realities into account when setting authorization levels each year.

America’s fragile food supply chain has taken one hit after another during the pandemic. The government may not be able to control every aspect of food price inflation, but when it comes to the soybean oil market, this is one area where government actions can help. The EPA should acknowledge the soybean oil supply crisis and temporarily lower the RFS mandate for advanced biofuels to allow supply to keep pace with demand. Otherwise, the soybean oil supply crisis will escalate, and consumers will pay the price.

American Bakers Association

American Frozen Food Institute

Sauces and Sauces Association

Consumer Brands Association

National Council of Restaurant Chains

National Retail Federation

Pet Food Institute

SNAC International

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