The National Corn Growers Association (NCGA) and the Renewal Fuels Association (RFA) were both quick to negatively react to the suggestion that a waiver of the Renewable Fuel Standard is warranted at this stage of crop production.
“NCGA stands firm in its support of the Renewable Fuel Standard and will strongly oppose legislation to alter or repeal the RFS. Likewise, we believe it is premature for a waiver of the RFS provisions at this point. With the crop still in the field, it is too early to determine this year’s final corn supply. In addition, the ethanol industry now has a significant surplus of ethanol and RFS credits that can greatly offset ethanol’s impact on the corn supply,” said Garry Niemeyer, president of the NCGA.
“However, we recognize the severe impact of the drought on our farmers and our customers, here and abroad, with livestock, poultry, ethanol and other processing facilities, and we believe the flexibility of the RFS does work, and will work. NCGA also supports the waiver process that is embodied in the current RFS, and respects the right of those that may file a waiver petition to do so,” Niemeyer’s official statement continued.
Niemeyer’s statement was the reaction to a conference call hosted by a coalition of livestock and poultry groups Monday announcing plans to seek a waiver of the RFS.
“Given the flexibilities inherent to the RFS, and the fact that waiving the program would not result in any meaningful impacts on corn prices, we fully expect Administrator [Lisa] Jackson to deny any waiver request,” said Bob Dinneen, RFA president and CEO. “A dispassionate review of the facts can lead to only one conclusion: a waiver of the RFS would simply reward oil companies that have long sought to repeal this very important and successful program. The RFS has reduced our dependence on imported oil and saved consumers at the pump.”
Dinneen claims the RFS waiver would do little to alleviate the high price of feed for livestock producers, and that corn ethanol plants produce a large volume of quality feed from the gain they process. “Limiting ethanol production will only further complicate drought related feed issues and costs,” he said.
Dinneen referred to a recent analysis by Professor Bruce Babcock at Iowa State University that simulated the corn price impacts of a 100 percent waiver of the RFS during the upcoming 2012/13 corn marketing year and concluded that a waiver might result in only a 4.6 percent reduction in corn prices. In calculating the impact, it would appear to be an average per bushel lower price to farmers of between 30 cents and 40 cent for corn based on current prices.
“Many of our farmer members are suffering immensely from the drought. Many are also in the same predicament as our customers because they have livestock or own ethanol plant shares. Now is the time for all of American agriculture to pull together and work together for solutions that benefit us all,” Niemeyer said.
Dinneen provided a technical explanation of the flexibility in the RFS. He noted that ethanol producers can “bank” excess Renewable Identification Number (RIN) credits and use them for compliance in the following year. “It is estimated that some 2.4 to 2.6 billion excess renewable fuel RIN credits are currently available to obligated parties, equivalent to nearly 20 percent of this year’s RFS renewable fuel requirement,” he said. That supposedly then can reduce corn demand by 20 percent for this crop year
As in the past, the RFA noted that ethanol stocks currently stand at 800 million gallons. Moreover, ethanol exports—which reached record levels in 2011—are slowing dramatically to compensate for current market conditions. These both help reduce ethanol demand in conjunction with the RINs.