This is why Big Ethanol will fight to the death to fully preserve the Renewable Fuel Standard

posted at 4:41 pm on February 11, 2014 by Erika Johnsen

In a word: Monies. …Major. Cash. Monies.

Federal forecasters expect U.S. farm income to decline 26.6% to $95.8 billion this year, the lowest level since 2010, due to a sharp drop in corn and soybean prices.

The Department of Agriculture projected that U.S. net farm income would decrease due to an almost $11-billion decline in corn receipts and a decline of more than $6 billion in soybean receipts. Corn and soybean prices fell last year as U.S. growers harvested large crops, including the biggest U.S. corn crop in history.

Farm income last year was $130.5 billion, a nominal all-time high.

Farm incomes roughly doubled from 2006 through 2011 as rising global demand for grains and increased federal mandates for corn-based ethanol production drove prices higher.

To review: Via the Renewable Fuel Standard, the federal government incentivizes agribusiness to grow waaay more corn than America actually wants or needs by mandating that oil refiners blend a certain and annually increasing volume of biofuels into the nation’s gasoline and diesel supply (and I might add that agribusiness accomplishes this rent-sought feat by bringing more and marginal lands into production, helping to obliterate what we were once told were the manifold environmental benefits of corn-based ethanol).

So we end up with more corn than we even know what to do with, but when prices subsequently drop — which, in a sane and market-driven world, would be an excellent signal to stop growing so much corn –  agribusiness need not fear because government crop insurance is there to shield them from prices that are “too low.” Why the agriculture sector is especially deserving of so much federal cushioning, I will never understand — and in fact, they’re probably less so than other industries, as President Obama openly acknowledged in his own FY 2014 budget proposal, via the Washington Post:

“The farm sector continues to be one of the strongest sectors of the U.S. economy, with net farm income expected to increase 13.6 percent to $128.2 billion in 2013, which would be the highest inflation-adjusted amount since 1973,” it pointed out. “With the value of both crop and livestock production at all-time highs, income support payments based upon historical levels of production can no longer be justified.” …

The bill expands crop insurance subsidies, which the president had targeted for reduction because of their wasteful, distorting impact on both the federal budget and farmers’ use of land, labor and capital. … Worst of all, it creates two new programs — Agriculture Risk Coverage and a Supplemental Coverage Option — which, taken together, all but guarantee beneficiaries’ revenues never fall below 86 percent of their earnings during years of high crop prices, according to estimates by Montana agricultural economist Vincent H. Smith. This federal largess is subject to no significant means-testing. In fact, people making up to $900,000 in adjusted gross annual income can qualify for payments. Why would a president concerned about inequality endorse such welfare for the prosperous?

But I digress, and anyhow, the agriculture lobby already won the crop-insurance fight for at least the next five years when President Obama signed the latest appalling rendition of the farm bill into law last week. (Ugh.) Back to the Renewable Fuel Standard: Big Ethanol really doesn’t want the artificially bloated demand for corn to be erased with a decrease in RFS requirements, because why should anyone have to back out of what has otherwise become an amply profitable industry when the federal government is there for the lobbying?

That’s why the EPA’s proposal to even just slightly back away from the requirements was such an unwelcome development for Big Ethanol, and why they’re doing everything in their power to try and — ahem — persuade the EPA to reevaluate that decision. The comment period on the rule change ended on the last Tuesday in January, so we should be finding out more soon.


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um, we’re broke. stop handing money to farmers. kthx …

ABreitbart on February 11, 2014 at 4:48 PM

can we get the names of the players in Big Ethanol? I want to know who is demanding access to my wallet.

DanMan on February 11, 2014 at 4:48 PM

The ethanol lobby, politicians, and our president.

Too bad there isn’t one working brain cell in the group.

Turtle317 on February 11, 2014 at 4:49 PM

Meet Kaptain Korn.

Grammar Nazi on February 11, 2014 at 4:51 PM

Because they don’t mane any money in the free market?

Just like other alternative “energy sources” like solar, wind and Unicorn Farts.

ConstantineXI on February 11, 2014 at 4:53 PM

Finally switched to non-ethanol based gasoline and my mileage has gone up by at least 5 MPG. A very desirable change for my personal economy. Save the corn to make mash for whiskey as we need that more while the Socialist is still in office.

Krupnikas on February 11, 2014 at 4:53 PM

corny capitalism at work.

PackerBronco on February 11, 2014 at 4:57 PM

We need to send Iowa to the back of the primary line.

rbj on February 11, 2014 at 4:58 PM

Krupnikas on February 11, 2014 at 4:53 PM

my F150 gets a reliable 10% better mpg without the 10% ethanol fuel

DanMan on February 11, 2014 at 5:00 PM

We need to send Iowa to the back of the primary line.

heard a rumor Texas will be #5 in 2016. We haven’t had a competitive presidential primary in many years here.

Get to know Cruz.

DanMan on February 11, 2014 at 5:01 PM

Inequality? Farmers actually produce something. Bongo’s Gibs Squad produces nothing except misery.

SickofLibs on February 11, 2014 at 5:03 PM

my F150 gets a reliable 10% better mpg without the 10% ethanol fuel

DanMan on February 11, 2014 at 5:00 PM

Because the BTU content of petroleum is higher. Ethanol served its purpose once. Technology passed up long ago.

CW20 on February 11, 2014 at 5:04 PM

Every farmer I have talked to could care less about the RFS. Farmers don’t set the prices, they simply react to the market. Don’t blame them for the sins of Big Ethanol.

airupthere on February 11, 2014 at 5:06 PM

So when does someone file a class action lawsuit against the EPA for ruining our internal combustion engines? This ethanol gas has already ruined three of my lawn mowers in 2 years. My car can’t handle anymore than 10% ethanol. Does the EPA still plan on upping the amount to 15%?

jawkneemusic on February 11, 2014 at 5:07 PM

my F150 gets a reliable 10% better mpg without the 10% ethanol fuel
DanMan on February 11, 2014 at 5:00 PM

Same here. My little Honda used to get nearly 420 miles a tank on the highway. Now I’m lucky if I can reach 320.

jawkneemusic on February 11, 2014 at 5:09 PM

um, we’re broke. stop handing money to farmers everyone

burning food for fuel – what a bunch of maroons

Infidelius on February 11, 2014 at 5:09 PM

Big-ag will fight to the end to sustain their subsidies. No different than seniors voting to perpetuate their social security & medicare; food stamp recipients voting to perpetuate their ebt cards; Sandra Fluke rallying for her subsidized birth control and abortions; and on and on and on.

Everyone’s looting everyone and we’re on the road to the end game. Soon enough the money runs out and the currency collapses. Maybe not tomorrow but not that far off.

Franklin100 on February 11, 2014 at 5:17 PM

If the EPA backed off on the “Renewable” Fuel Standard, couldn’t corn farmers sell the extra corn for export to countries that can’t grow their own corn? For example, Saudi princes have gotten filthy rich selling us oil–can’t we get some of our money back selling them corn, which doesn’t grow there?

If there’s not enough market overseas, the price of beef has gone up astronomically since the RFS was enacted. Could some of the excess corn be sold as livestock feed, which would enable livestock to fatten more quickly and lower the price of beef and pork?

Steve Z on February 11, 2014 at 5:21 PM

Nice to see so many new noms here. To all you new ones, my first comment here at HA. Yes it is on topic.

I have long thought turning our food crops into fuel was idiotic. I don’t know how it is in other states but here in Ga we still have access to straight gas. It has been popular for gas powered tools as the ethanol based stuff will mess up the seals. Many boaters and folks with older cars use it exclusively. I was listening to a radio show once when a trucker called in with what I thought was a really good idea. A good idea if we are going to insist on using ethanol. He pointed out that the highway administration owns millions of acres of land between the highways. This land cost the government millions a year to maintain i.e. mow. The truckers idea was to grow sugar beets in all those places, spring planting no maintenance, fall harvest. What do you think?

Bmore on December 8, 2011 at 5:30 PM

Bmore on February 11, 2014 at 5:33 PM

My car can’t handle anymore than 10% ethanol. Does the EPA still plan on upping the amount to 15%?

jawkneemusic on February 11, 2014 at 5:07 PM

The left wants more people to use public transportation. Ruining the older vehicles will force those who can’t afford to buy newer models onto it.

agmartin on February 11, 2014 at 5:36 PM

I hate these people!

Every time they get involved with markets they eff it up and then blame free enterprise for creating poor people.

UnstChem on February 11, 2014 at 5:36 PM

This is WHY

$$$$$$$$$$$$$$$$$$$$$$$$$$

no typing of words needed for goodness sakes!

Katfish on February 11, 2014 at 5:43 PM

My car can’t handle anymore than 10% ethanol. Does the EPA still plan on upping the amount to 15%?

jawkneemusic on February 11, 2014 at 5:07 PM

The left wants more people to use public transportation. Ruining the older vehicles will force those who can’t afford to buy newer models onto it.

agmartin on February 11, 2014 at 5:36 PM

Bonus: More work for the greedy UAW!

slickwillie2001 on February 11, 2014 at 5:49 PM

So feed all that extra corn to the cows and other livestock and let’s us all eat more and cheaper tasty protein. Even third world countries eschew grain, want affordable animal protein.

It was a good run while it lasted, but my bet is the small family farmer gained only marginally if at all. As for the big farming conglomerates, they have, in the words of Obama, probably made “enough money” on this boondoggle.

marybel on February 11, 2014 at 5:52 PM

Alcohol contains just 2/3′s the BTU’s of gasoline – you have to burn more of it to get the same power output, or to go the same distance.

Thank Archer Daniels Midland, Monsanto, and the other Big-Ag conglomerates.

Another Drew on February 11, 2014 at 5:55 PM

Not to forget, here’s the link to where you can buy ethanol-free gasoline: http://pure-gas.org/

Second, go to Lowe’s or HD and buy ‘Trufuel’, ‘gasoline’ in tin cans for mowers and yard tools, comes in pure, 32:1 and 40:1. Too expensive for cars though.

slickwillie2001 on February 11, 2014 at 5:57 PM

Look for prices to rebound if we get any kind of spring rains to go along with a large impending spring melt.

TRB on February 11, 2014 at 6:04 PM

The truckers idea was to grow sugar beets in all those places, spring planting no maintenance, fall harvest. What do you think?

Bmore on December 8, 2011 at 5:30 PM

Bmore on February 11, 2014 at 5:33 PM

Actually that idea is a non-starter as our government would not allow it. If you think we’re handing gobs of extra cash to corn farmers, you also need to check out what we give to the sugar beet farmers.

Most people don’t realize that sugar prices are manipulated by the US government through the use of import quotas and farmer price supports.

Historically the price of sugar in the US has run about double of the world price. At the moment the gap is narrower with near term contracts for US sugar at about $.21/lb where “world” contracts are about $.16/lb.

So yeah, as consumers, we’re taking it in the shorts on this one also.

climbnjump on February 11, 2014 at 7:31 PM

climbnjump on February 11, 2014 at 7:31 PM

No doubt government has generally been the problem, not the solution.

Bmore on February 11, 2014 at 7:58 PM

Corn based ethanol actually uses more energy and petroleum products to produce than it generates.Just like wind mill and solar. And that is insane.

pat on February 11, 2014 at 8:50 PM

Since we want to be faaaaaaaaaaaair, how about no subsidies for anybody?

Seems faaaaaaaaaaaaaair to me.

Adjoran on February 11, 2014 at 9:50 PM

Corn based ethanol actually uses more energy and petroleum products to produce than it generates.Just like wind mill and solar. And that is insane.

pat on February 11, 2014 at 8:50 PM

Nope, not the case. I’m not defending ethanol use in gasoline here, but I am defending facts…

The thesis that a gallon of ethanol requires more energy to produce than it yields dates back studies written in the late 90′s and early 2000′s by a professor at Cornell who happened to be a big opponent of ethanol. His “research” has since been thoroughly debunked. I could list many of his errors, but I haven’t got all night to do it.

Currently, there is a positive energy gain of about 2.3 BTU’s output to 1 BTU input in the production of corn based ethanol.

Yes, that report was written by the USDA and they aren’t exactly unbiased on this subject, but if you want to spend a little time with Mr. Google, you can come up with similar stats from other sources.

Again, I’m not defending ethanol use in gasoline – I buy straight gas whenever I can – but let’s not argue against it using bad data.

climbnjump on February 11, 2014 at 10:28 PM

This is real ‘corporate welfare’ at its worst, and political corruption as usual.

s1im on February 11, 2014 at 10:31 PM

I live in SW ND in farm & ranch country. I live on a border area with SD where there’s more ranches than farms. We are on that edge.
We only ranch. We farm nothing.
My husband’s father did both, but was a farmer at heart. And did not take govt payments.
He went bust back in the 80s bcs he overextended himself to create a bigger farm for his 4 sons & was losing the place & it literally killed him. His dying ‘saved’ the place for his sons.
I have watched the corruption of farm payments since I moved here in ’99. I have intimate knowledge of what my neighbor farmers are doing & how they are scamming things.
Farming has become so dependent upon the Federal govt that they literally have no way to compensate if Uncle Sugah pulls the plug entirely. They are scared, like children, to go it alone, like we do in ranching.
Corn right now I hear is not worth much. And with how wet most of it is & propane at almost $6/gallon, the butthurt is going to be tremendous.
Cattle numbers are at an alltime low, although we produce more beef with less cows now. Genetics.
But I digress.
The real point here is that though amongst my farming neighbors are many good honest people just trying to make a living, they miss the point that they are raping the Federal coffers for their own enrichment & many just cannot stand on their own two feet.
So they cling to the politicians who will give them $$ in the form of crop insurance subsidies, payments, etc. Hence the RHINOs in farm & ranch country.
They are so very conservative in their politics elsewhere, but when it comes to FEMA disaster aid etc, they are some of the worst wh0re mongers for cash you’ve ever seen.
Hubby & took disaster aid once. $15,000 for hay in the worst of the last drought. It wasn’t worth it & barely helped us. I feel disgusted by it. We want nothing. I’m sure we could have gotten something from the Feds from the Atlas storm, bcs we were in it & lost a little livestock.
But it is not worth it.
And never again. We will either make it or lose this place on our own.
I just get tired of competing with farmers for resources bcs the Federal govt games the system one against another, picking winners & losers. It makes it hard to run our ranch profitably.

Badger40 on February 12, 2014 at 9:24 AM