US corn demand for ethanol to flatline as US eyes advanced biofuels

Source: By Tim Worledge, AgriCensus • Posted: Tuesday, July 9, 2019

The announcement that the US will freeze the mandate for ethanol under the Renewable Fuel Standard at 15 billion gallons next year has been met with fury by corn and biofuel groups.

The Environmental Protection Agency (EPA) announced Friday that it would boost the overall contribution of biofuels by 0.6% to 20.04 billion gallons, but the entire increase is focused in advanced biofuels – leaving ethanol unchanged at 15 billion gallons.

Biodiesel’s 2021 mandate – set a year in advance of the other mandates – will also remain at 2.43 billion gallons, unchanged versus the 2020 level.

Industry sources see the measure as another sop to Big Oil and argue that the unchanged mandate does not allow for the loss of blending volumes incurred through the controversial use of a waiver programme.

The waiver provision is built into the RFS to help small independent refineries that struggle with the financial burden of meeting the blending mandates but has been massively expanded in recent years with huge multinational oil majors now also claiming.

Biofuel sources estimate that the expanded use of waivers has led to the loss of 2.6 billion gallons from the mandated volumes over the last two years, with the industry looking for some redress in increased 2020 blending mandates.

Fury

Press releases bristled with angst at the news, describing the situation as “unconscionable”, and speaking of frustration and disappointment, while seeking to remind the president of his commitment to “take care of our farmers”.

The response also hints at some of the wider concerns swirling around the Trump administration, with the lobby group Americans for Energy Security and Innovation speaking of “Russia and its allies in the Middle East” agreeing to limit production to support oil prices.

“The EPA should do more to shield our economy from global markets and drive investment in rural America, where farm communities continue to struggle,” former Republican senators Jim Talent and Rick Santorum of the AESI said in its press release.

One of the US’s biggest ethanol producers POET highlighted the impact of weather for the US farmer and called for the EPA to reconsider its proposal.

“Barring a clear and meaningful reallocation of waived gallons, the RVO will not instil confidence in the US farming community during a year in which they’ve been hard hit with historically bad weather,” said Kyle Gilley, POET’s senior vice president of external affairs and communications.

“It is a complete misnomer to call these blending volumes ‘obligations’ when EPA’s small refinery bailouts have essentially transformed the RFS into a voluntary program for nearly one-third of the nation’s oil refineries,” said Geoff Cooper, CEO and President at the Renewable Fuels Association.

The USDA is expecting the US to consume 5.5 billion bushels of corn (139.7 million mt) to make ethanol in the 2019/20 marketing year, up slightly from the 5.45 billion bushels it is set to consume in 2018/19 (138.4 million mt).

However, with corn prices spiking there are fears that US ethanol production margins will suffer, and producers may either cut production or switch to use alternative feedstocks such as sorghum.

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