Most recently, the The Environmental Protection Agency announced that it is scaling back something called the Renewable Fuel Standard, a federal law that requires a minimum amount of ethanol be blended into gasoline.
The EPA proposal for this year is 15.2 billion gallons of renewable fuel, which is roughly 3 billion fewer gallons than was originally required.
This has lowered the price for corn, and could continue lowering it into the future.
Doom and gloom
Farm organizations — particularly those who represent grain farms — have produced a whirlwind of statements the past few days about all the doom and gloom this will cause to farmers, and the American consumer.
Indeed, there will be many effects. I feel for farmers who planted this year’s crop thinking there would be a solid market at year’s end, only to find the rug pulled out from under them.
However, I also question why the rug was there in the first place. It is a risky thing when the government mandates the future of our energy sourcing, especially when it’s setting the policy two decades in advance.
The RFS has certainly made some winners: Corn growers, ethanol plants, environmentalists, and they claim, the American consumer.
But, if ethanol is so great, and saves us all so much money, why can’t the market support it on its own?
That’s a question I’ve heard from livestock farmers, particularly those who buy a lot of their corn. And it’s a valid question that comes from people who seek a free and open market, as opposed to one that is subsidized by a government mandate.
For livestock farmers and those who use corn for food, lower corn prices are a good thing.
The National Corn Growers Association, responding to the RFS cutback, said it is “outraged” and that the EPA’s decision “should be condemned by all consumers because it is damaging to our tenuous economy and short-sighted regarding the nation’s energy future.”
Well, maybe if you’re operation is built on corn and beans. But perhaps it’s time we got a little “short-sighted” — a little more near-sighted as to what’s actually happening. If you want to buy beef in the store — a product that is usually fed some grain — you’ve been paying record prices since the RFS went into effect, in part because of the higher price of grain.
The price of other meats, and milk, have risen considerably as well, and the margins for producing those foods has become tighter than ever — squeezing many livestock producers out of operation altogether.
The National Corn Growers further says the RFS cutback will be “devastating for family farmers and the entire rural economy.”
I guess time will tell. Perhaps, as corn prices return to more of a farm-market normal, we’ll start to see more corn being fed to livestock instead of being turned into fuel. Maybe we’ll see the price of producing livestock and milk become something more producers can afford again — and that more consumers can afford those products in the store.
Maybe instead of fields that are planted to corn, corn, corn and corn again, we’ll see a little more crop rotation. That would be a good thing for the soil, for cutting down on nutrient loading issues and for diversifying our agricultural production.
I don’t see the “devastation” in that.
The Associated Press produced a striking, and yes, controversial, report on the state of ethanol titled “Making corn-based ethanol badly hurting environment.”
Consider this one small excerpt:
“The government’s predictions of the benefits (of ethanol) have proven so inaccurate that independent scientists question whether it will ever achieve its central environmental goal: reducing greenhouse gases. That makes the hidden costs even more significant.”
I am not a policy expert. Perhaps reducing the RFS at this stage in the game will cause the problems some predict. I do feel, though, that as the corn lobby cries the blues over the RFS scaleback, we’ve got to look at the other side of the coin — and you can bet — there is one.