Nebraska farm organization says holding ground on ethanol not good enough

Source: By Robert Pore, Grand Island Independent • Posted: Tuesday, July 11, 2017

The Environmental Protection Agency’s (EPA) announced last week that it will maintain the conventional biofuel requirement at the 15 billion gallon level in renewable volume obligations (RVOs) for 2018.

“Holding ground is not good enough,” said Gale Lush of Wilcox, chairman of the American Corn Growers Foundation (ACGF). “It’s a minimal, inadequate corn ethanol demand strategy.”

“The Environmental Protection Agency announcement will do little or nothing to move corn markets according to one market analyst,” he added.

Lush said the U.S. corn industry needs to be “doing more than just ‘holding ground’ in terms of our domestic U.S. corn use because exports are forecast to drop substantially in the 2017-2018 marketing year.”

“As a longtime grain farmer and co-op patron what’s needed is for the farmer-owned co-ops to make a major commitment toward installing as many ethanol blender pumps as possible at all of their gas stations,” Lush said. “E-10 ethanol is great, but we need coops to be marketing a lot more of it plus E-15, E-30 and E-85 ethanol blended gasoline to drive demand growth in our domestic market.”

Lush said that strategy makes “more economic sense for farmer-owned cops than investing in risky foreign grain export ventures that promote U.S. competitor grain exports which compete directly against U.S. exports.”

Bon Dinneen, Renewable Fuels Association president and CEO, said his organization is pleased EPA is proposing to maintain the conventional biofuel requirement at the 15 billion gallon level.

“By maintaining the 15 billion gallon level for corn ethanol, the rule will also help to drive more investment in infrastructure to accommodate higher ethanol blends,” Dinneen said. “The RFS is a vital policy and we encourage EPA to finalize this rule as quickly as possible and certainly in time to meet the statutory deadline of Nov. 30.”

Sen. Deb Fischer, R-Neb., a member of the Senate Committee on Environment and Public Works, said she is “happy to see the EPA’s proposed conventional RVOs comply with the law. Our producers need more certainty given the status of our current farm economy,” she said.

By law, according to Fischer, EPA is required to finalize the upcoming year’s mandates for conventional ethanol and most advanced biofuels by Nov. 30 of the previous year. A public comment period is open following the release of the proposed volume obligations.

Nebraska is the second largest ethanol-producing state in the nation ,with 25 ethanol plants with the capacity to produce more than 2 billion gallons annually.

Gov. Pete Ricketts, who is also chairman of the Governors’ Biofuels Coalition, said the EPA announcement shows that the “Trump Administration recognizes the important role of ethanol in meeting the fuel needs of Nebraskans and drivers across the country.”

“We also encourage continued support of advanced and cellulosic biofuels in the final 2018 RVO,” Ricketts said. “Ethanol producers and investors across Nebraska and the country are exploring new technologies to produce cellulosic fuels and continue the growth of this important industry.”

But ACGF Director Dan McGuire is also concerned that just holding ground when it comes to ethanol production is heading in the wrong direction, especially when it comes to the type of price support the ethanol industry has provided the corn industry by giving them another market for their commodity. The lack of recent production growth in the ethanol industry is one of the contributing factors of lower corn prices.

McGuire said the USDA is projecting that marketing year (MY) 2017-2018 U.S. corn exports will drop by 350 million bushels to 1.875 billion bushels, down from the projected 2.225 billion bushels of corn exports in the current MY 2016-2017 marketing year. 1.875 billion bushels is about the range of the 40-year U.S. corn export average.

“When we consider that the same USDA-WASDE report projects MY 2017-2018 U.S. corn ending stocks at 2.110 billion bushels and an average farm-level corn price of $3.00 to $3.80 per bushel, the importance of the domestic ethanol-driven corn demand of 5.5 billion bushels cannot be overemphasized as a key market driver,” McGuire.

He added: “Likewise, keeping the role of U.S. corn exports in proper perspective is also essential so that government and farm policy leaders remember what agricultural economists and some farm and commodity organizations projected when they were promoting and lobbying for the free trade 1985 farm bill and 1996 ‘Freedom to Farm’ farm law, both of which created today’s farm programs that now rely on crop insurance for rural economic damage control.”

McGuire said policy experts in the 1980s and 1990s projected annual U.S. corn exports would be in the 3 billion bushel range by now.

“Their overly optimistic export projections clearly missed that target by a country mile,” McGuire said. “Had farmers relied on those faulty ‘expert’ export projections we would have had years of seriously low grain prices.”

He said the impressive growth of ethanol-driven corn demand from its level in 1980 to 5.5 billion bushels in 2017-18 served to “mitigate the less-than-impressive U.S. corn export record and prevented the rural economy from being in desperate straits for years.”

“More ethanol-driven corn demand means lower year-end corn ending stocks/inventory and that means stronger corn prices,” McGuire said. “It’s that simple. Farmers and policy advocates must never forget that ethanol is the best, most efficient corn demand component in the annual corn supply and demand balance sheet.”