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Dropping the RFS would have minimal impact on corn prices
The renewable fuels industry says there will be no problem meeting the Renewable Fuels Standard this year and repealing it would not have much impact on corn prices. An analysis by Professor Bruce Babcock with the Center for Agriculture and Rural Development (CARD) at Iowa State University says a total waiver of the RFS would reduce corn prices by 28 cents per bushel or less than five percent and cause a less-than-five-percent reduction in ethanol production.
Babcock notes there are flexibilities built into the RFS for situations such as what we are experiencing this year. He tells Brownfield’s Julie Harker; “that flexibility is fairly dramatic in terms of the impact of the waiver.”
Under the rule, obligated parties can build up blending credits called Renewable Identification Numbers (RINs) when they exceed RFS requirements which can be carried over to the next year. There are an estimated surplus 2.5 billion RINs available right now plus if that is not enough, an obligated party can carry a deficit of RINs into next year. Babcock cautions that his analysis assumes a certain value of ethanol to blenders and if that were to drop it would impact the price of corn. But, he adds, there is a strong recognition that ethanol adds value to refineries and blenders, not to mention what it means to consumers at the pump. He notes how gasoline prices spike when a hurricane takes ten percent of our refining capability off the market, “We don’t want to suddenly take ten percent of our fuel supply of the market with ethanol.”
Renewable Fuels Association president Bob Dineen says, “Strong supplies of ethanol in storage and an abundance of RINs combine to make the RFS a workable and achievable program in 2012 and 2013.” Dineen cautions this is not the time for “knee-jerk reactions”.
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