Economists downplay impact of EPA’s RFS proposal

Source: December 16, 2013 By O. Kay Henderson, Radio Iowa • Posted: Tuesday, December 17, 2013

Two Midwestern economists say the EPA’s proposed reduction in ethanol production in 2014 will contribute to a “slow down” in what’s been a booming ag economy, but it won’t drive the farm economy into negative territory. Iowa State University economist David Swenson says there won’t be “much of an impact” on the production of ethanol

“Rolling it back to last year’s levels, that means that maybe at risk within the Iowa economy — literally — just a few dozen jobs at the production side,” Swenson says. “Now the impacts out into the farm sector, into the grain prices — that’s negative, but again the economists at Iowa State are saying, ‘Well, it’s not as much as people maybe think it’s going to be.’ Plus, they’re anticipating reasonably healthy worldwide demand for exports.”

That overseas demand should prop up corn prices, according to Swenson. Creighton University economist Ernie Goss agrees that the ethanol industry will “weather” this storm over a reduced “Renewable Fuels Standard” for ethanol production in 2014.

“There will be some job losses,” Goss says. “There’s no doubt about what, but I don’t think they’re going to be as significant as some are saying.”

Anything connected to agriculture is slowing down, according to Goss, from farm equipment sales to ag land prices, but he expects ethanol plants to survive.

“We’re seeing some of the air coming out of the agricultural bubble and we did have a bubble beginning in January of 2009,” Goss says. “…Ethanol is going to weather this.”

Goss and Swenson made their comments during a weekend appearance on Iowa Public Television’s “Iowa Press” program.