Backstabbing the ethanol industry

Source: By David Kruse, The Spencer Daily Reporter • Posted: Monday, April 1, 2019

I was told by a director of the Iowa Corn Growers that at a meeting they discussed my recent reports where I had noted that the National Corn Growers Association is dropping the ball in pushing back against President Donald Trump personally on renewable identification number waivers. He said that there were no objections there to my challenge. During their meeting, they found out that Trump had approved five more requests from refiners for RIN waivers, totaling another 350 million gallons. That is 2.6 billion gallons in total RIN obligations now waived by the Trump Environmental Protection Agency. With 19 more waiver requests, that number should grow.

The director, a Trump supporter, said that he felt like he was slugged in the gut by the announcement of more RIN waivers. I asked if they were going to start calling them “Trump RIN waivers” and got no commitment — they are afraid of challenging him personally. Trump uses fear effectively, in fact counts on it. The new RIN waivers issued will just about equally match the benefit of the E15 vapor waiver expected this year. So, he permits E15 summer use which the NCGA cheers about and then takes all of the benefit of E15 away by responding to the petroleum industry request for more RIN waivers. That way he can claim to love both farmers and oilmen, but who does he love more?

The 2.6 billion gallons of RIN waivers granted refiners by Trump weigh heavily that he loves oilmen more. That watered down the RFS corn ethanol mandate below 15 billion gallons where it was supposed to be by deducting for the RIN waivers. The Corn Growers are going to sue for it but admit that even when they win sometime in the distant future, nothing changes. The RIN obligation waived will not be restored. The price of RINs has been diluted from 80 cents per gallon to 20 cents per gallon or less. That means that the price of not blending ethanol fell by 75 percent because of the waivers. Additional modifications were being made to the RIN market at the behest of refiners. This lost ethanol demand killed the ethanol market, eliminated plant margins and idled ethanol plants. This was all done at the behest of Trump.

When RINS were waived last year, the Corn Growers, and may I include the Iowa RFA, focused criticism on Scott Pruitt who then left. By not putting responsibility for the RIN waivers on Trump they essentially gave him cover to continue to say how much he loved ethanol and farmers despite doing the most damage to the RFS ever. They were afraid if they criticized him for the RIN waivers that he may not approve E15. That was a valid concern, but what happens? He approves E15 and then coincidentally offsets it by approving more RIN waivers. Yeah, a slug to the gut. Are they going to stay down on their knees and take it or stand up and do their jobs, which is to defend the corn and ethanol industries from all enemies including Trump? We will see.

We have a problem as I see it that those who are supposed to defend agriculture are not doing so out of fidelity to Trump and party. Iowa Sens. Chuck Grassley and Joni Ernst have been all we have defending us in Washington, and they were rolled by Trump on ethanol policy too. They claim that they got lied to by Pruitt when they voted to confirm him. They pushed back hard on Sen. Ted Cruz who championed RIN waivers, and they lost. Trump went with Cruz. Yet even then they did not criticize Trump because of party, they also voted to confirm Andrew Wheeler as EPA head because Trump wanted him, so who are they going to blame for the RIN waivers this time? Once fooled OK, but twice deceived, then they are the fools.

Actually, I believe they knew what was happening and chose party first over their constituents. There is a lot of that going around these days. The ease at which the EPA is now approving E15 showed how much they were lying before when they said they could not do it. We knew they were lying, and they just proved it. Here is the headline that tells it all, “Ethanol Use Declined Last Year for the First Time in 20 Years” because of the RIN waivers. Trump ethanol policy is directly responsible for this.

The blending rate fell because enough refiners had their obligation to the RFS waived which lowered the price of purchasing RINs for other refiners to meet their obligation, which meant that more refiners bought RINs instead of blended ethanol. Cruz is smiling over this. He beat down Grassley and Ernst. Trump’s policy toward RIN waivers has not changed, and there are reportedly 10 more requests from refiners for additional RIN waivers pending.

When Trump comes to Iowa, he will be crowing about his approval of E15 with at least one Branstad applauding beside him, if not two, and you will not hear a word about the RIN waivers negating 2019 E15 demand growth because no one wants to anger him. If the trade deal with China comes off as touted, China should buy U.S. ethanol, putting it in their shopping cart of commodities. Trump RFS policy made that ethanol cheap. Trump will tout the boost in ethanol export sales to China as a great benefit to the ethanol industry and Corn farmers who love him.

Then do you know what he will do? My bet would be that he will grant more RIN waivers and water down the RFS some more, offsetting nearly all of the benefit from ethanol exports to China. He is playing the Corn Growers and RFA like a fiddle, and they keep dancing to whatever tune he plays no matter how many times he punches them in the gut.

• David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the internet. CommStock Investments is a registered CTA, as well as an introducing brokerage.

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