An upcoming government ruling on biofuels mandates is important to the industry's future, said David Ripplinger, a biofuels economist.
The much-anticipated decision from the Environmental Protection Agency will be a "really big deal for what's going to go on in biofuels now and in the next 10 years," he said.
Ripplinger, assistant professor in the department of agribusiness and applied economics at North Dakota State University and the state's bioenergy and bioproducts economist, spoke Oct. 30 in Grand Forks, N.D., at an agricultural outlook conference for ag lenders. About 100 people, primarily bankers from northeast North Dakota, attended the conference, organized by the NDSU Extension Service.
Other NDSU ag outlook conferences were held earlier in Bismarck, N.D., and Minot, N.D., with the fourth and final conference scheduled for Nov. 3 in Fargo, N.D.
A big U.S. corn crop has pushed down corn prices, improving ethanol crush margins and industry profitability. Producers' crush margin, about 50 cents per gallon in the summer of 2013, shot to $2.50 per gallon this summer before declining to 20 to 60 cents per gallon now, Ripplinger said.
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"It's been a banner year," he said.
Now, the ethanol industry is waiting for EPA's final ruling on the Renewable Fuels Standard, which mandates minimum use of biofuels by type and year. The agency can change the mandate for several reasons, including inadequate supply.
Lowering the mandate weakens the industry's safety net and hurts its short- and long-term outlook, Ripplinger said.
A year ago, EPA proposed to reduce the original 2014 mandate of 14.4 billion gallons of corn from ethanol to 13.01 billion gallons. The proposal was heavily criticized by the renewable fuels industry and corn growers.
Ripplinger's best guess is that EPA's final ruling will set the mandate at 13.8 billion gallons, roughly halfway between the original mandate of 14.4 billion gallons and the proposed reduction to 13.01 billion gallons.
EPA's reasoning for the final number will be particularly important, Ripplinger said. The agency said a year ago it's concerned that the blend wall, or the maximum amount of ethanol that consumers can utilize, is being reached.
The RFS and the biofuels industry will be hurt if EPA again cites the blend wall as a reason to reduce the RFS mandate, he said.
"The justification for the 2014 final rule has huge implications for the renewable fuel sector," Ripplinger said.
