IFB: RFS2 waiver would be 'highly ineffective'
After surveying the Illinois ag landscape, energy and corn market dynamics, and the cross-sector impacts of ethanol mandates, Illinois Farm Bureau urged federal officials to stay the course with the Renewable Fuel Standard (RFS2).
Published: Oct 15, 2012
Last Thursday, the U.S. Environmental Protection Agency (EPA) closed public comment on a proposal to waive 2013 nationwide RFS2 ethanol blending requirements. The agency is expected to rule on a waiver request by mid-November.
The request was submitted in August by seven southern/southwestern governors and backed by key livestock groups concerned about the impact of RFS2-driven ethanol demand on 2013 corn availability and prices.
However, a new University of Missouri Food and Agricultural Policy Research Institute (FAPRI) analysis questions the need for that concern.
FAPRI concluded a full waiver of RFS2 conventional biofuels requirements might reduce corn prices by a mere 0.5 of a percent or 4 cents per bushel in 2012/13. Ethanol production might drop by a meager 1.3 percent in 2012/13, it stated.
Added corn available for feed via a pare-back in RFS2 targets might increase by 0.6 of a percent, FAPRI reported. The study concluded an RFS2 waiver would have no effect on retail beef prices in 2013, and at most would trim 1 cent per pound from retail pork prices.
“Given the volatility of 2012 (and other recent years), an RFS waiver would seem to represent a rather clumsy policy instrument that would be highly ineffective and unlikely to yield any predictable -- let alone meaningful -- price relief for livestock producers,” IFB argued in its comments to EPA.
Further, AgriVisor commodity analyst Dale Durchholz cited energy market forces that indicate an RFS2 waiver “isn’t going to have a huge impact in the game at this point.” Durchholz maintained ethanol supply and demand “is purely a game of economics” -- i.e., the relationship between ethanol and gasoline prices.
Ethanol demand will subside now that blenders are switching from summer gas blends used in higher-pollution markets to “winter blends” with reduced oxygen content, he said.
But Durchholz stressed blenders still need ethanol for “octane enhancement” related to reduced-temperature engine performance.
And given continued petroleum market volatility, ethanol continues to track favorably vs. gasoline. Oil prices passed $92 per barrel last week amid tensions between Turkey and Syria.
“Overall gas consumption seems to be subsiding a little bit with the slower economy,” he said in an RFD Radio-FarmWeek interview. “Ethanol economics are poor for some particular plants, which is slowing production in some places.
“As far as ethanol demand over the next few months, and corn demand as a result, I think an RFS2 waiver is pointless and meaningless. Right now, the economics, to a degree, say, ‘Use ethanol.’”
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