The folks from the Renewable Fuels Association are pointing to two university studies as proof any waiving of the Renewable Fuel Standard (RFS) would not significantly lower corn prices. The issue came to the forefront in the last few weeks as the drought pushed corn prices to record levels, and livestock groups look to the RFS waiver as relief from those prices. But this RFA news release points to a Purdue study (featured earlier here on Domestic Fuel in a webinar put on by Farm Foundation) and Iowa State University research that the drop in corn prices would be only about 5.6-7.4 percent. The webinar earlier today also showed the lower prices for producers and consumers at the grocery stores would not happen this year.
“The desire by livestock groups to see additional flexibility on ethanol mandates may not result in as large a drop in feed costs as they hope,” wrote Iowa State Professor Bruce Babcock. “…the flexibility built into the Renewable Fuels Standard allowing obligated parties to carry over blending credits (RINs) from previous years significantly lowers the economic impacts of a short crop, because it introduces flexibility into the mandate.”
Similar comments came from the authors of the Purdue study. “A partial waiver certainly is not a ‘stroke of the pen’ solution…” to record high corn prices, they wrote. “Corn prices pushed higher by the worst U.S. drought in half a century would not necessarily moderate if the federal government’s corn ethanol mandate were temporarily suspended,” according to a Purdue University press release announcing the release of the study.
“These economic analyses compellingly show that waiving the RFS is unnecessary and would be ineffective in meaningfully reducing corn prices,” RFA President and CEO Bob Dinneen said. “Congress and EPA built sufficient flexibilities into the RFS to ensure compliance is achievable even under the most abnormal and extreme circumstances, such as this summer’s drought. These studies recognize the impact of that built-in flexibility and show that a waiver would not significantly contribute any additional further relief from drought-induced high corn prices.”
You can hear the audio from today’s webinar here: Farm Foundation-Purdue Webinar on Drought and RFS Waiver You can see the associated slide show here.