Rumor hit trading floor about ethanol waiver

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Late last week, a rumor hit the Chicago Board of Trade trading floor that the Environmental Protection Agency (EPA) was going to waive down the Renewable Fuel Standard (RFS) by 20 percent, reports the Renewable Fuels Association (RFA). Of course, that was a false rumor that had the potential to catch fire because of concerns about drought lowering the U.S. corn crop and having too large a percentage of corn going into ethanol production. 

The rumor “underscores how misinformation spread deliberately or unintentionally can move markets and create mass confusion,” noted the RFA. To try and make sure that more rumors about corn ethanol and any RFS waiver don’t catch fire, the association provided details on what has to happen for a waiver to be put into effect.

“In order for EPA to waive RFS requirements, the agency must find that the program is causing economic ‘harm.’ The agency can reach such a finding on its own, or it can be asked to examine the question of harm via  petition from the public. EPA must provide a public comment period and consult with other relevant agencies before making any final decisions regarding a waiver request. In short, EPA cannot waive the overall RFS targets on a whim. There is a well-defined process for waivers. You may recall, Texas Gov. Rick Perry filed a petition alleging harm from the RFS in 2008. After a thorough investigation, EPA roundly rejected Gov. Perry's petition.” 

It is the contention of RFS that there is sufficient corn stocks for the industry to stay on pace to easily satisfy this year's RFS target of 13.2 billion gallons. Year-to-date figures would indicate production for the year of 13.9 billion gallons. Additionally, the U.S. continues to export ethanol due to domestic market constraints, and the outlook is for exports of 900 million gallons this year.

“The bottom line is the EPA has no justification for altering the overall RFS in any way, nor does it have the authority to impulsively reduce the program's targets,” RFS claimed in its Monday news release. “Ultimately, the market will sort out any imbalances in supply and demand.  Much like the petroleum industry, ethanol producers will read market signals and make decisions accordingly.”


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