Farm groups tie RFS uncertainty to low income projections

Source: Amanda Reilly, E&E reporter • Posted: Friday, October 9, 2015

In a joint white paper, farm groups today warned that a reduction in annual biofuel targets compared with the levels Congress wrote into the 2007 renewable fuel standard (RFS) would slash farmers’ income.

The white paper by the National Corn Growers Association and National Farmers Union blames U.S. EPA’s long-delayed bid to set the annual targets for already-depressed conditions in farm country. According to federal projections, farm income is already poised to fall to its lowest level this year in nearly a decade.

Weak biofuel targets would have a “continuing downward push” on expected farm income, Roger Johnson, president of the National Farmers Union, told reporters today on a conference call.

“We’ve got surplus of production all over the place, we have squashed demand as a result of this RFS action that principally impacts corn,” Johnson said, “but as anyone in agriculture knows, what happens to one major commodity affects all commodities.”

EPA is poised to release long-delayed final renewable fuel targets for 2014, 2015 and 2016 by a court deadline of Nov. 30. The agency earlier this year proposed to increase year-by-year mandates for refiners, but the proposal would reduce the targets compared to the levels Congress wrote into the 2007 RFS.

EPA said the proposal stemmed from short-term limits to the amount of ethanol that can be added to gasoline, as well as lower-than-expected production of advanced biofuels made from non-food plant materials (Greenwire, May 29).

The release of the white paper today is part of an ongoing campaign by farm and biofuel interests in opposition to EPA’s proposed targets. They say the targets threaten to undercut rural economic development spurred by the RFS over the last several years, as well as undermine energy independence goals.

“The EPA is causing uncertainty throughout the whole renewable fuel and agricultural value chains,” the paper says.

According to the Agriculture Department, net farm income this year is expected to decline by 26 percent compared to peak levels in 2013.

While the farm groups acknowledged there were other factors playing into the decline, they said the delay in setting final RFS targets as well as worries about the proposed levels were the main culprits. They pointed to several ethanol plants that have halted production recently.

“I can tell you as a farmer that has increased production in the last couple years and that lives next to one of those ethanol plants that closed down about a month ago,” said Chip Bowling, president of the corn growers’ group, “it has changed the basis in the price that we receive for our corn.”

Bowling said he had no indication from EPA whether the agency would boost its proposed targets in the final rule due in November. The agency received more than 600,000 comments on the proposal, including from ethanol critics urging EPA to set lower mandates.

EPA has maintained that its approach is “ambitious” but in line with market realities.

Despite a lack of final RFS targets, the conventional ethanol industry actually had its single most profitable year in 2014, producing a record 14.3 billion gallons. Exports had helped drive growth; with no clear U.S. targets for ethanol, producers looked overseas for new markets.

But the Renewable Fuels Association yesterday said that in August, exports of ethanol shrank to their lowest monthly level — 50.1 million gallons — in more than two years based on federal data. Meanwhile, imports of the fuel had ticked back up to 15.7 million gallons after being almost nonexistent for several months.

The export market has been weak, according to RFA Senior Vice President Geoff Cooper, because the price of ethanol has neared or surpassed the price of gasoline over the past few months.

“We have seen some erosion of export demand in international markets,” Cooper said, “that were importing U.S. ethanol strictly as a discretionary replacement or extender for gasoline.”