The declining state of this year’s corn crop has prompted new calls for elimination, or at least a modification, of the Renewable Fuels Standard (RFS), which currently mandates 15.2 billion gallons of renewable fuels going into the nation’s fuel supply this year, most of that from corn. On Thursday, Congressman Bob Goodlatte (R-Va.), who serves as vice chairman of the House Agriculture Committee, introduced a bill that would allow flexibility in the RFS based on corn supplies.
Goodlatte and economist Thomas E. Elam, president of FarmEcon LLC, discussed the proposed legislation and the impact of the RFS on food and fuel prices in a news conference sponsored by livestock and meat groups including NCBA and the American Meat Institute.
At the heart of the problem is that as this year’s corn crop shrinks daily, the mandate for ethanol production doesn’t. About 40 percent of this year’s corn crop will go toward ethanol production to meet that standard, perhaps more as yield estimates decline. By 2022, the RFS target expands to 36 billion gallons.
Goodlatte’s Renewable Fuel Standard Flexibility Act would link the amount of corn ethanol required for the RFS to the amount of the U.S. corn supplies, using a formula based on the ratio of corn stocks to expected use. He says if the policy were in place now, it would trigger a 25 percent reduction in the RFS. Separately, Goodlatte also introduced the Renewable Fuel Standard Elimination Act which would eliminate the RFS altogether.
“The federal government’s subsidization of the ethanol industry has quite frankly created a domino effect that is hurting consumers,” Goodlatte says. “With the increased use of food and feed stocks diverted for ethanol, the higher cost for these crops is passed on to livestock and food producers. In turn, consumers see that increased price reflected on the price of food on the grocery store shelves.”
Following Goodlatte in the news conference, Elam discussed his new report titled “The RFS, Fuel and Food Prices, and the Need for Statutory Flexibility.”
Elam’s research indicates that corn-based ethanol blending requirements have destabilized corn and ethanol prices by offering almost risk-free, guaranteed demand to the ethanol industry while other corn users bear a disproportionate share of market and price risk.
Increases in ethanol production since 2007 have made little, or no, contribution to U.S. energy supplies, or dependence on foreign crude oil, he says. Instead, those increases have pushed gasoline supplies into the export market.