In what could be billed as the worst-kept secret, in farm country at least, President Trump reportedly confided to Iowa Sen. Chuck Grassley in a White House meeting this morning, prior to departing for a campaign visit to Iowa, his intention to formally instruct the Environmental Protection Agency (EPA) to allow year-round sales of gasoline blends with up to 15 percent ethanol, rather than limit the blend rate to the current 10 percent.
The EPA currently bans the high-ethanol blend, called E15, during the summer because of concerns that it contributes to smog on hot days, a claim ethanol industry advocates say is unfounded.
Michigan Farm Bureau President, Carl Bednarski, a Tuscola County cash-crop farmer, said while the announcement was highly anticipated for the past month, the certainty of an official announcement would definitely be good news for Michigan corn farmers.
“Given the current farm economy, predicted record corn yields and the negative price impacts of ongoing trade disputes and retaliatory tariffs, any news that potentially increases corn utilization and consumption is great news,” Bednarski said. “More importantly, we hope the announcement also includes restoring integrity and confidence in the country’s Renewable Fuel Standards (RFS) by requiring refiners to follow the law, by prohibiting the EPA from granting unnecessary waivers or exemptions to bypass RFS-mandates.”
According to Bednarski, the American Farm Bureau Federation, National Corn Growers Association, National Farmers Union, National Sorghum Producers, American Coalition for Ethanol, Growth Energy, and Renewable Fuels Association had urged the Trump administration to act immediately in a September letter following comments made by Secretary of Agriculture Sonny Perdue in late-August that an announcement would be coming soon.
The letter noted that due to EPA’s mismanagement of RFS and inexplicable delay in removing the de facto summertime ban on E15, ethanol prices, RIN credit prices, and ethanol profit margins were falling, as small refiner exemptions issued by EPA had reduced ethanol demand and inflated burdensome ethanol stocks.
“With ethanol prices hitting a 13-year low and net farm income plummeting to half of the record $123 billion achieved in 2013, such an announcement could not come at a more critical juncture for rural America,” the groups wrote. “Former EPA Administrator Scott Pruitt already gave refiners far more than their end of a deal in the form of 2.25 billion gallons of biofuels demand destruction, and they are reaping the rewards of that windfall today.”
The Michigan Corn Growers Association and a group of the state’s ethanol producers also praised the announcement. Jim Zook, executive director of the Michigan Corn Growers Association said the year-round sales of E15, will help grow demand for corn and improve economic conditions across rural America.
“The Michigan Corn Growers Association and our grower members will be actively engaged in the process in the coming months,” Zook said. “We strongly urge the Environmental Protection Agency to move forward with implementing the President’s plan by next summer.”
Michigan is home to five ethanol plants. In a joint-statement signed by: David Gloer, General Manager of POET Biorefining – Caro; Vince Brennan, Vice President of Marysville Ethanol; Mitch Miller, CEO of Carbon Green BioEnergy; Mike Irmen, President of the Ethanol Group at The Andersons, Inc. and Todd Becker, President and CEO of Green Plains – Riga, they called the announcement, “a big win for Michigan consumers, rural communities and farmers.”
“This regulation will remove an outdated and unnecessary barrier that prevents consumers from accessing higher blends of ethanol, including E15. Higher ethanol blends save consumers money when they fill up at the pump and help improve air quality by reducing dangerous greenhouse gas emissions from gasoline,” they said.
Bednarski said prices received by farmers for corn are sagging below the cost of production in many areas, including Michigan. According to National Ag Statistics Service reports, Michigan corn farmers are expected to harvest an estimated 1.85 million acres of corn for grain this year, with an average trend yield of 167 bushels per acre, ultimately producing nearly 309 million bushels of corn.
Meanwhile, new-crop (December) contracts for corn on the Chicago Board of Trade have declined nearly 15 percent, dropping from $4.28 per bushel on May 29 - prior to the start of the current trade and tariff battles – to $3.65.
“That’s a loss of 63 cents per bushel,” Bednarski said. “If you do the math, that’s a loss of more than $194 million in market value, in just four months. So you can begin to appreciate the need for some positive market news, for Michigan farmers.”