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Published January 27, 2014, 10:12 AM

Corn growers worry about price decline if RFS is reduced

Crop farmers in the northern corn belt who have benefited from ethanol targets are putting on a push to save the current renewable fuel standard (RFS) from proposed cuts by the Environmental Protection Agency.

By: Mikkel Pates, Agweek

FARGO, N.D. — Crop farmers in the northern corn belt who have benefited from ethanol targets are putting on a push to save the current renewable fuel standard (RFS) from proposed cuts by the Environmental Protection Agency.

The proposal would cut the 2014 corn ethanol fuel requirement to 13 billion gallons, from the 14.4 billion gallons the RFS otherwise would have required. The deadline for comments to the EPA is Jan. 28, unless extended. A decision is expected this spring.

“American farmers have produced a record corn crop of 14 billion bushels, according to U.S. Department of Agriculture estimates, and corn prices are falling and currently stand close to where they were when the RFS was enacted in its current form in 2007,” says the website of the North Dakota Corn Growers Association. Farmers need $4.25 per bushel to cover current production costs, and changing the law could drop prices to $3.50 per bushel.

Minnesota was the first state to mandate E10 (10 percent ethanol blend) fuel in 1991. The bill was pushed by Dave Frederickson — then a Swift County farmer and freshman state senator, later a president of the National Farmers Union, a staffer for U.S. Sen. Amy Klobuchar, D-Minn., and since 2011, the Minnesota agriculture commissioner.

The Minnesota Department of Agriculture estimates that if EPA plans are carried out, ethanol production would fall by 110 million gallons annually in the state, and Minnesota corn used in ethanol would decline by 49 million bushels a year.

The draft rule also leaves the bio-diesel target for 2014 and 2015 at 1.28 billion gallons, the same target level as 2013, but down sharply from estimated 2013 production of 1.7 billion gallons and the industry’s annualized production rate of about 2 billion gallons since July.

Big tri-state impact

Minnesota ranks fourth in ethanol production, behind Iowa, Nebraska and Illinois, with 22 plants and more than 1.014 billion gallons of ethanol in 2013, of which more than half is exported. South Dakota has 15 plants with 1.012 million gallons of production. North Dakota has five active plants producing some 360 million gallons, by one industry estimate.

The Minnesota Corn Growers Association says 7,000 letters from corn farmers have been sent asking the EPA not to “slash” the RFS. The North Dakota Corn Growers Association sent out an appeal to more than 8,000 corn growers, and on Jan. 23 would be passing 1,500 signatures onto the EPA, an official of the organization told Agweek.

Hitting a blend wall

The RFS was created in 2005 and expanded in 2007. It established a series of 15 years of annual targets for ethanol use in the nation’s fuel supply. In 2009, the ethanol industry ran into a crisis with high corn prices and a recession that cut gasoline use.

In 2013, ethanol producers ran into a “blend wall” for ethanol because it is largely used at 10 percent to create E10 gasoline, and because of reduced gasoline use from the recession.

Ethanol was initially promoted as a new market for corn, but later as a renewable fuel.

“People are saying, don’t mess with the RFS,” says MCGA President Ryan Buck of Goodhue, Minn. He says the cut is an “attempt by the oil industry to re-establish its monopoly on transportation fuels.”

He says Minnesota Gov. Mark Dayton urged EPA not to cut the RFS, saying, “our feedstock crops boost the entire state’s economic outlook, especially in once-struggling rural areas.”

The U.S. meat, chicken and turkey industries have supported recent Senate efforts to remove the mandate for corn ethanol.

Steve Olson, executive director of the Minnesota Turkey Federation, based in Buffalo, says his organization has asked for changes for the past nine years, particularly a “trigger mechanism that would temporarily issue a waiver if the stocks-to-use ratios got below a certain level,” at about 10 percent stocks to use. “The sad thing is that the climate has shifted. Now there’s a threat that the RFS goes away all together,” Olson says. “All we want is a level playing field. We don’t have a mandate that people have to eat so much poultry each year.”