RFS is most important value-added ag market

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In seventeen pages of comments, the Renewable Fuels Association (RFA) answered questions put forth in the U.S. House of Representatives’ Committee on Energy and Commerce Renewable Fuel Standard (RFS) Assessment on Agricultural Sector Impacts.

Bob Dinneen, RFA’s president and CEO, reminded the committee, “…it is important to remember that a central objective in developing a vibrant and robust ethanol industry was to increase demand for agricultural products and enhance farm income. Girded by the RFS, ethanol has become the single most important value-added market for American grain farmers, stimulating investment in agricultural technology and enhancing economic opportunities for rural communities across the country. The emergence of the ethanol industry over the past decade has served as an incredibly important economic catalyst, transforming the grain sector from a stagnating, surplus-driven marketplace to one that is vibrant, high-tech, and demand-driven. As a result, the net impacts of the RFS and ethanol production on the agriculture sector have been decidedly positive, and U.S. meat output and retail food prices have not been adversely affected.”

Before answering in detail nine questions on topics ranging from commodity prices, job creation, inherent RFS flexibility, food prices, future cellulosic benefits, and impact on global agriculture production and land use, Dinneen framed the larger discussion and conclusion. “…[T]he RFS is absolutely essential for stimulating future demand and driving investment in the next generation of feedstocks and biofuels. Without the RFS to drive future growth in renewable fuels, production and use of renewable fuels would stagnate or regress due to 1) the resistance of refiners to produce and sell gasoline blends with greater than 10% ethanol, and 2) abandonment of investments in advanced and cellulosic biofuels due to the lack of market certainty. As a result, consumers would be denied the additional economic and environmental benefits associated with greater ethanol use.

“Moreover, while we understand the Committee is interested in specifically examining the impacts of the RFS, it is somewhat counterproductive to examine only the potential impacts of a single transportation energy option (i.e., renewable fuels) in isolation of other competing energy options (i.e., unconventional petroleum). That is, petroleum demand and prices also have important effects on U.S. agricultural and food markets. Every step of the food supply chain is reliant on petroleum products—from the use of diesel fuel in farm machinery, to the use of natural gas in food processing plants, to the use of plastics in food packaging, to the use of gasoline and diesel fuel to transport food to the grocery store or restaurant. The correlation coefficient between global food prices and global oil prices since 2000 has been 0.92, which indicates a near-perfect relationship (1.0 is a perfect correlation).We understand that the economic effects of petroleum dependence are outside of the scope of the Committee’s current initiative, but biofuels should not be considered in a vacuum.”

There is no credible evidence whatsoever to support the notion that the RFS is adversely affecting consumer food prices. Indeed, food price inflation has been falling since the RFS was enacted, and Americans are spending less on food than any time in history.


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