Research Shows Leading RFS Reform Proposal Would Hurt Farmers

The Iowa State study shows that unless exports can make up for the reduced mandate, corn prices would drop. ( Farm Journal Media )

A new study from the Iowa State University Center for Agriculture and Rural Development shows a cap on Renewable Identification Numbers (RINs) would dramatically reduce ethanol use.

The leading Renewable Fuel Standard (RFS) reform proposal being considered by the Trump Administration would allow the sale of E15 year-round and would cap D6 RIN prices between $0.10 to $0.20/RIN.

“While year-round sales of E15 would encourage retailers to sell the fuel, capping D6 RIN prices would reduce consumption of E15 and E85,” the study says, adding that a cap on D6 RIN prices between $0.10/gal to $0.20/gal would likely reduce the effective ethanol mandate from 15 billion gallons to about 14.3 billion gallons in 2018.

National Corn Growers Association president Kevin Skunes, says the analysis supports what farmers have continued to say since this debate started.

“This economic analysis backs up what corn farmers have been telling the Administration – that manipulating the RIN market mechanism would reduce ethanol blending and impact corn prices. A drop of 25 cents per bushel in corn prices, as CARD economists project from a RIN price cap, would devastate farmers and stagger rural communities,” Skunes says.

Furthermore, the Iowa State study shows that unless exports can make up for the reduced mandate, corn prices would drop.  That would obviously present an additional challenge for farmers already being squeezed by tight margins.

“This spring farmers will begin planting knowing they face their fifth growing season with corn prices hovering at or below the cost of production,” Skunes says. “According to the Federal Reserve Bank, we lost 12,000 farms in 2016. This decline must be stopped.”

NCGA believes “providing regulatory parity” for E15 and higher blends will help address the concern about the cost of RINs.

“Allowing the RIN market to operate freely with year-round sales of E15 would increase the production and consumption of renewable fuels, increase the supply of RINs available for compliance and lower RIN values,” Skunes says. “Combining RVP parity with a RIN price cap is counterproductive and would lower ethanol blending.”