August 3, 2012

Battle over RFS heats up

So many things going on in the US ethanol market especially current  drought conditions for corn crops (and even soybeans for biodiesel).

Corn prices are going up and that means ethanol prices have been going up too especially when some ethanol plants have been idled because of the lack in demand, which could mean lower ethanol inventories going forward. According to an ICIS news* article, the US Department of Agriculture trimmed its projected yield for 2012 corn by 12% as of its July estimate.

Ethanol producers Archer Daniels Midland (ADM), Grain Processing Corp., and MGP Ingredients have all announced price increases for their ethanol citing higher corn prices, according to ICIS.

Because of the higher corn-derived products prices resulting from the drought, industry food groups such as the National Chicken Council, the National Cattlemen's Beef Association, the National Pork Producers Council and other meat and poultry trade groups (dairy, milk, turkey, sheep, etc...) are requesting several US Congress representatives to petition for a change in the 2012 Renewable Fuel Standard (RFS) mandated by the Environmental Protection Agency (EPA).

The RFS requires 13.2bn gallons of corn-based ethanol to be produced in 2012 and 13.8bn gallons in 2013. The trade groups argue that the RFS requirement is aggravating the drought impact on food prices.

According to an August 2* article from ICIS News, more than 150 Republican and Democrat members of Congress have signed a letter to the EPA requesting the RFS amendment.

The coalition opposed to the current RFS mandate noted some agricultural forecasters estimate' of 11.8bn bushels of corn will be harvested this year, compared with about 13bn that were harvested last year. Under those conditions, corn-ethanol production will use about four of every 10 bushels, the coalition said.

Meanwhile, several biofuel groups have also been arming themselves as they urged the EPA to maintain the RFS mandate.

Today, eight biofuel industry organizations namely -- the Advanced Biofuels Association, Advanced Ethanol Council, Algae Biomass Organization (ABO), American Coalition for Ethanol, Biotechnology Industry Organization (BIO), Growth Energy, National Biodiesel Board (NBB) and the Renewable Fuels Association (RFA) -- have formed a new council called Biofuels Producers Coordinating Council.

The new council will jointly advocate for the EPA to maintain the RFS mandate. According to the council, US production of biofuels has tripled since the adoption of the RFS standard.
“Undermining the RFS will have a chilling effect on the development of cellulosic feedstocks that are not used for food or feed. The RFS is important for all biofuels, but it is critically important for cellulosic feedstock process development. To undermine the RFS now would wound this feedstock development effort that in the long run is going to help both farmers and ranchers. This aspect is often neglected by the media and is not well understood by cattle ranchers, pork and chicken producers." - BIO
The EPA has yet to respond to the RFA waiver petition from members of Congress.

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