Ethanol: changes in the wind


By: Steven Perrin

As the worst drought in 50 years continues to ravage the corn crop in United States, the wheels are starting to turn on possible changes to the government-imposed usage mandates. 

It is expected that the governors of four states will petition the federal government for a reduction in the mandated use levels.

States expected to sign the petition are South Carolina, Nebraska, Texas and Arkansas. It is no surprise that these are all home to large numbers of intensive livestock feeding operations.

These states are supported by National Cattlemen’s Beef Association, National Chicken Council and National Turkey Federation.The target of the petition is to influence the mandate known as the Renewable Fuel Standard (RFS).

There is talk of introducing a provision that would reduce mandated usage levels when corn supplies tighten.Last year the US produced 13.9 billion gallons of ethanol, mostly from corn. This equates to roughly one third of last year’s corn crop. RFS mandates that by 2015 there are 15 billion gallons of ethanol produced on an annual basis in the US; this level of production is to be maintained until 2022.

An interesting point to note is that the states signing the petition are represented by governors on either side of the political aisle. While there has been opposition to RFS mandates in the past, never has it been strong enough to unite opposing parties.

In 2008 Texas requested the Environmental Protection Agency reduce the production mandate but they were denied their request.The reality of the situation is that the request will likely fall on deaf ears. As these four states are feeling the crunch of high feed prices, there are as many states reaping the benefits of having ethanol plants within their borders, taxes and jobs.

Another opposing factor is that the general election is only a little more than three months away. An issue as divisive as this is likely to be left alone until after all the votes have been tallied. This seems to be the beginning of any opposition to an issue that has never had anyone with political aspirations willing to publicly oppose. It will be interesting to see how this unfolds and how, if at all, it affects the market. To sit down with me and see what FarmLink Marketing is all about, give me a call at 204-761-0267.