Study Shows Impact of RIN Price Cap on Corn Prices

Cindy Zimmerman

A new analysis from the Center for Agricultural and Rural Development (CARD) at Iowa State University shows that any action to artificially cap Renewable Identification Number (RIN) prices in exchange for a waiver allowing year-round sale of E15 would result in reduced ethanol consumption, a drop in corn prices, and an effective cut of 5% to the Renewable Fuel Standard (RFS) conventional renewable fuel requirement.

During meetings with RFS stakeholders last week at the White House, a proposal to lower RIN prices for oil refiners was made that would cap RIN prices at 10 cents in exchange for a Reid Vapor Pressure (RVP) waiver for E15.

“The study confirms imposing a price cap on RINs would abrogate the potential benefit of RVP parity for E15. Fundamentally, a RIN price cap and E15 RVP parity work at cross purposes. One is intended to grow demand for biofuels; the other is intended to reduce demand. The net result would be an effective cut to the RFS, lower ethanol production, lower corn prices, and higher consumer gasoline prices,” said Renewable Fuels Association President and CEO Bob Dinneen.

National Corn Growers Association President Kevin Skunes said, “This economic analysis backs up what corn farmers have been telling the Administration – that manipulating the RIN market mechanism would reduce ethanol blending and impact corn prices. A drop of 25 cents per bushel in corn prices, as CARD economists project from a RIN price cap, would devastate farmers and stagger rural communities.”

Both corn and ethanol interests are standing strong on the option of capping RIN prices. “Not on any proposal that would reduce demand,” said Dinneen. “The message is simple, this program is not broken. It is working as it is intended.”

Dinneen discusses the RIN price issue in the latest edition of The Ethanol Report.

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