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RFA Wants Current RFS Maintained

RFA Wants Current RFS Maintained

Dinneen calls proposed re-legislation of the Renewable Fuel Standard a bad policy decision.

It is being reported that Representatives Bob Goodlatte, R-Va., and Jim Costa, D-Calif., are considering a move to waive a portion of the RFS when the corn stocks-to-use ratio falls below an arbitrarily determined level. According to Renewable Fuels Association President and CEO Bob Dinneen, research clearly demonstrates that implementing an RFS waiver trigger based on the stocks-to-use ratio will not have the effects on corn prices desired by livestock and poultry interests, nor will it mean more corn is immediately available for feed use. 

Dinneen calls this more a knee-jerk policy reaction. The stocks-to-use ratio has limited value as an indicator of expected market dynamics and price. University of Illinois economist Darrell Good cautions that stocks-to-use ratio should only be considered as a starting point for estimating potential price impacts since very different supply and demand conditions in individual years can lead to similar ratios of stocks-to-use but very different prices.

Recent studies have concluded that the RFS has been only a minor contributor to corn prices in recent years. A July 2011 analysis commissioned by the International Centre for Trade and Sustainable Development found that corn prices would have been exactly the same in 2009/10 if both the RFS and Volumetric Ethanol Excise Tax Credit had not existed.

Also according to the Center for Agriculture Development ethanol has provided an average annual savings to consumers at the pump of 25 cents per gallon. They conducted a study earlier this year that in 2010 gasoline prices were 89 cents lower than they would have been without the use of nearly 13 billion gallons of ethanol.

"If successful, reducing America's use of its own domestic renewable fuel would wallop consumers at the pump, resulting in far greater economic pain than the marginal impact ethanol production has on grain prices," said Dinneen.  "In fact, given the disproportionate impact on food pricing exerted by energy and fuel prices, raising gas prices by reducing ethanol use would exacerbate concerns with rising food prices.  This is simply the wrong policy to address corn supply concerns."

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