NFU, NCGA point to RFS uncertainty as explanation for drop in farm income

WASHINGTON, Oct. 8, 2015 – Two agricultural groups released documentation today claiming that uncertainty surrounding the Renewable Fuel Standard (RFS) is a major factor in projected drops in net farm income.

The white paper was released Thursday by the National Farmers Union and the National Corn Growers Association, and it pointed to USDA’s Economic Research Service’s projected 26 percent drop in net cash income for farmers. The paper calls the RFS “the most significant growth factor for agriculture since its inception,” and that the “agricultural economic revolution spawned by the renewable fuel industry helped raise farm incomes across nearly all agricultural sectors.”

The Environmental Protection Agency has been under fire for its administration of the RFS for some time after delayed Renewable Volume Obligations (RVO) announcements led to a lawsuit from the American Petroleum Institute and American Fuel and Petrochemical Manufacturers. That lawsuit resulted in a timeline for announcement of 2014 and 2015 RVOs, and the EPA is voluntarily announcing the 2016 RVOs along the same schedule. An announcement is expected by the end of November.

But, as the white paper notes, the uncertainty in the blending requirements under the law led to uncertainty at ethanol plants across the country, forcing many to close. NCGA President Chip Bowling said he lives by one of those closed plants in southern Maryland, and the economic effect of the plant’s closure has been felt far and wide.

“It has changed the basis in the price that we receive for our corn, it has changed the way we are buying equipment, it has changed the way we to go out to dinner,” Bowling said on a call with reporters. He said a nearby equipment dealer has seen a “30-40 percent drop” in new equipment orders. “Most of that is due to the uncertainty in the renewable fuel standard because that’s what built the farm economy up.”

Roger Johnson, NFU president, said it is “imperative that President Obama gets the RFS on track,” adding that anything short of statutory levels would have “a continuing downward push on expected net farm income.” Aside from the recent uncertainty, both Bowling and Johnson stated their organization’s respective view points that the EPA is damaging investment in the renewable fuels industry by setting targets that fall below statutory levels.

“Unfortunately, the EPA is failing farmers, rural communities, our environment, and economic security by refusing to fulfill its responsibilities to administer the RFS consistent with its statutory obligations,” the paper said. “Beginning with its attempt to undermine the RFS in a late 2013 proposed rule and its proposed rulemaking this year, EPA continues to stifle the growth in the renewable transportation sector.”

In May, EPA proposed incremental increases in every biofuel category, including corn ethanol used in E10 and higher blends at gas pumps across the country. In 2015, the agency is proposing 16.3 billion gallons of renewable fuels – short of the 20.5 billion statutory target – with the potential for 13.4 billion of those gallons coming from corn ethanol.

In 2016, the agency suggests further increases to 17.4 billion gallons of biofuels - a jump of about 1.5 billion gallons from actual 2014 production but below the 22.25 billion called for in statutory language – with the potential for corn ethanol to account for 11.4 billion of the total.

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