D.C. Watch: Ethanol industry essential to U.S. economy

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A study commissioned by the Renewable Fuels Association indicates that the ethanol industry is extremely important to the U.S. economy. The production of 13.3 billion gallons of ethanol produced or created 86,503 jobs and sustained an additional 300,277 indirect and induced jobs. The industry added $44 billion to the country’s GDP, according to the study.

The ethanol replaces 476 million barrels of imported oil.

Action in the market for RINs (Renewable Identification Numbers) suggests that traders believe that EPA will reverse the proposed rule to reduce the biofuels mandate for 2014. RIN values have increased significantly in recent weeks, suggesting that companies think the mandate for corn-based ethanol may be set above the 13 billion gallons in the proposed rule and may exceed the size of the market for E-10.

If blenders are required to use more ethanol than the market can absorb (due to the “blend wall”) they can meet the requirement by submitting extra RINs. (On the other hand, if the mandate is set at or below the blend wall, the value of RINs would be close to zero.).

Other news from Washington:

  • Detailed analysis of the crop insurance programs available to farmers is available online. The National Crop Insurance Services has released an online tool called “Crop Insurance: Just the Facts." This tool provides information about new products (including the SCO and STAX programs) that are in the new farm bill. The tool will be continuously updated. This information can be accessed at the following online address: http://www.cropinsuranceinamerica.org/about-crop-insurance/just-the-facts.
  • The Keystone XL pipeline has run into a new stumbling block. Just two weeks ago the U.S. State Department raised no major environmental objections to the building of the pipeline. But this week a Nebraska judge struck down a law that allowed the pipeline to be built in the state. The judge ruled that any decision allowing the pipeline to be built in the state must be made by the Public Service Commission – not by the Governor. The ruling will be appealed to the Nebraska Supreme Court. Meanwhile, President Obama has still not decided on granting a federal permit for the pipeline to be built – even though his own State Department found no environmental grounds for blocking it.
  • The final farm bill did not include a controversial amendment that would have prevented California from requiring that all eggs sold in the state be produced according to state-set regulations. According to California law, laying hens must have room to stand up, lie down, turn around and fully extend their wings in their cages. Other states do not have those requirements. The Attorney General in Missouri is asking the U.S. District Court in California to declare California’s law invalid on grounds that it violates the commerce clause of the U.S. Constitution. The stakes are high. The suit notes one third of all the eggs sold in California last year were produced in Missouri.
  • The new farm bill has a completely revamped program for cotton producers. Big changes were needed because the WTO had ruled that the old program violated world trade rules in a case brought by Brazil. The WTO has authorized Brazil to impose hundreds of millions of dollars in retaliatory tariffs on U.S. exports if the U.S. did not bring its cotton policy into compliance. According to the Brazilian Association of Cotton Producers (ABRAPA), the new farm bill and insurance programs tend to cause even greater distortions in prices and cotton production than the old policies did. Brazil has not yet said that it will retaliate, but the statements from the ABRAPA are not encouraging.


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