Corn-Based Ethanol Costs Chain Restaurants Billions, Says NCC
The use of corn-based ethanol required by the federal Renewable Fuel Standard (RFS) mandate has dramatically increased costs throughout the food supply chain, according to the National Council of Chain Restaurants, which released a 32-page report on the impact of RFS on the chain restaurant industry.
At a Capitol Hill press conference, Ed Anderson, a Wendy’s franchise owner and chairman of Wendy’s Quality Supply Chain Cooperative, said the ethanol mandate was a well-intentioned idea that has turned out to be a costly mistake. He said each of his Wendy’s restaurants is paying an extra $20,000 to $30,000 per year because of the RFS.
“I doubt our customers know an EPA mandate is at the root of food cost increases,” said Anderson. “It’s a distorted market at the expense of small business owners like myself.”
To study the impact of federal ethanol policies on the chain restaurant industry, the National Council of Chain Restaurants (NCCR) commissioned PwC US to research, analyze and estimate the potential cost and economic impact of the federal RFS mandate. PwC estimated the impact under several scenarios and concluded that the RFS mandate could cost chain restaurants up to $3.2 billion annually, with quick-service restaurants witnessing cost increases upward of $2.5 billion, and full-service restaurants seeing increases upward of $691 million.
The production of ethanol and its byproducts represent the largest use of US corn production with roughly 45 percent of all US corn dedicated solely to ethanol production. Reflecting that use, the price of corn has nearly quadrupled since the RFS mandate was established in 2005. Higher corn prices have translated into higher commodity prices, grain prices, feed prices and consumer prices, says NCCR.
The NCCR says the RFS mandate is essentially an ethanol tax on consumers and should be repealed.
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