The National Corn Growers Association expressed outrage in the wake of an announcement by the U.S. Environmental Protection Agency that will significantly weaken the Renewable Fuel Standard by reducing the volumes for corn-based ethanol for 2014. “This recommendation is ill-advised and should be condemned by all consumers because it is damaging to our tenuous economy and short-sighted regarding the nation’s energy future,” said NCGA President Martin Barbre. “Agriculture has been a bright spot in a failing U.S. economy, but current corn prices are below the cost of production. EPA’s ruling would be devastating for family farmers and the entire rural economy.”
The Environmental Protection Agency’s proposed renewable volume obligations set the annual targets for the utilization of cellulosic, biodiesel, advanced and total renewable fuel within our transportation fuels. The proposed rule caps corn-based (or conventional) ethanol at 13 billion gallons. These proposed volume obligations are a drastic reduction from the mandated RVOs in statute. Today’s proposed rule cuts 1.4 billion gallons from the conventional ethanol cap that was set at 14.4 billion gallons.
Barbre noted the EPA proposal will make investments in new biofuels plants very risky, stagnate investment in infrastructure by petroleum marketers and send the wrong signals to automakers who want more direction on where they should be spending millions of targeted investments on research and development.
“Ethanol and the RFS have been a great success story. Now, the EPA is sending a terrible message that we no longer have a long-term energy policy for biofuels, which was the original intent of this forward-thinking legislation. The Administration has clearly backed away from their commitment to renewable energy and this proposal blatantly contradicts the President’s Climate Action Plan,” Barbre said. “The goal of the RFS is to reduce our dependence on imported oil to make our country more energy independent and more secure. It has done that while also revitalizing rural America.”
According to the U.S. Energy Information Administration, U.S. oil imports have decreased from 60 percent of our total usage to 45 percent. This was due to increased efficiency in our automobile fleet, the recession and the increased use of biofuels.
American farmers are currently harvesting their corn crops, and by the latest USDA projections, it will be a record 14 billion bushels. As a result of this record, corn prices are falling and currently stand close to where they were when the RFS was enacted in its current form in 2007.
While corn prices have returned to previous levels, the cost of producing the crop has continued to increase. In 2012, it cost $655 per acre to plant corn. Based on this year’s projected yields, a farm price of $4.25 per bushel would be required to cover production costs.
The psychological impact of EPA’s proposal is anticipated to push corn prices well below the cost of production. To further put this into perspective, if corn prices dropped to $3.50 a bushel farmers and the rural economy would lose more than $10 billion.
“A shock of this magnitude to agriculture markets would send ripples throughout the entire economy. Congress must carefully weigh the ramifications any changes to the RFS would have on agriculture and related industries. The U.S. economy and consumers can ill afford a downturn in this sector,” Barbre said. “EPA is making a conscious decision to limit ethanol’s access to the market even with the significant price advantage of ethanol compared to gasoline.”