RFS Decision Could Alter Biofuels, Corn, Soybean Markets


by Todd Neeley, DTN Staff Reporter


As a result of EPA's decision to delay the release of the 2014 Renewable Fuel Standard volumes until next year, an agriculture economist told DTN Friday that if the overall RFS volumes for 2015 jump to 15 billion gallons as outlined in the current law, there will be a gap between the so-called blend wall and the 2015 volumes.

Scott H. Irwin, Laurence J. Norton chair of agricultural marketing at the University of Illinois Urbana-Champaign, said that would create some interesting market conditions that could be a winner for corn and soybean oil, and a loser for soybean meal.

“If we go back to statute volumes, then something has to fill gap between E10 blend wall and renewable (ethanol) mandate,” he said. “In 2014 that gap is around a billion gallons (14.4 to 13.5 blend wall). Renewable mandate goes to 15 billion gallons in 2015. But the big enchilada is the undifferentiated advanced mandate, which in the statute is 2 billion gallons in 2014 and rises to 4 billion gallons by 2018.”

So if statutory volumes are enforced, Irwin said, both the renewable gap and the undifferentiated advanced mandate will have to be filled with either E85 or biodiesel or both, assuming an E15 market is not largely in play. That would mean the U.S. could see “huge ethanol imports from Brazil” and the U.S. exporting ethanol to Brazil.

“Corn is positive if E85 is used to fill renewable gap and advanced undifferentiated,” he said. “While U.S. domestic ethanol generally does not qualify as an advanced biofuel, the only other big supplier is Brazil, but they do not have large exportable surpluses. So, likely that whatever ethanol they would have to ship us to fill the advanced mandate we would have to in return ship our ethanol back to them — flavor of ethanol does not matter to them.”

This could amount to as much as 5 billion gallons of ethanol production by 2018, or 1.8 billion bushels of corn. “Of course, we don't have the capacity right now for that much of an expansion of ethanol production. So, I think the more likely scenario is a huge increase in biodiesel, both from domestic production and imports,” Irwin said.

If 5 billion gallons is needed for RFS compliance, he said, that translates into about 3.3 billion gallons of biodiesel. “That would take a cool 25 billion pounds of fats and oils for feedstock. An acre of soybeans produces roughly 500 pounds of soybean oil,” Irwin said. “If I did the math right, this would represent a 50-million-acre increase in soybean production around the world.”

Right now China takes a bit more than 60 million acres with its soybean imports, he said. “The acreage draw would on net increase price of all grains and oilseeds but the increase in SBM (soybean meal) would have to be netted out first.”


Following EPA's decision on the RFS, reaction poured in from all over the place — far too much to include in a single story.

Here's a sample of where agriculture and other industry groups stand on the decision:

-House Energy and Commerce Committee Chairman Fred Upton, R-Mich., Energy and Power Subcommittee Chairman Ed Whitfield, R-Ky., and Environment and the Economy Subcommittee Chairman John Shimkus, R-Ill., issued a statement saying the EPA decision is an indication that RFS reform is needed.

“Businesses and consumers have been waiting a year now for clarity and guidance from EPA, but this decision to completely abandon the 2014 targets only adds to the growing uncertainty and frustration. EPA cannot just choose to arbitrarily ignore the law and the deadlines established by Congress. This unexpected announcement highlights that there are still significant challenges facing the RFS and underscores the need to come together and find a practical, bipartisan solution.”

-American Soybean Association President Ray Gaesser said farmers have a number of concerns about the EPA delay.

“The continued delays create great uncertainty for the biodiesel industry and soybean farmers and limits the industry's ability to invest and expand. The proposed rule was unacceptable and would have taken biodiesel backward from the amounts produced and utilized in 2013. However, ASA believes that EPA can and should finalize a 2014 rule that sets the biomass-based diesel volumes at or above the nearly 1.8 billion gallons that were produced and consumed in the U.S. in 2013.”

-National Biodiesel Board Vice President of Federal Affairs Anne Steckel said the administration is sending mixed signals about its support for biodiesel.

“This administration says over and over that it supports biodiesel, yet its actions with these repeated delays are undermining the industry. Biodiesel producers have laid off workers and idled production. Some have shut down altogether. We know that fuels policy is complex, but there is absolutely no reason that the biodiesel volume hasn't been announced. We are urging the administration to finalize a 2014 rule as quickly as possible that puts this industry back on track for growth and puts our country back on track for ending our dangerous dependence on oil.”

-Novozymes Americas President Adam Monroe said the decision opens the door for reforms that will help the biofuels industry.

“We want to thank the EPA for listening to the concerns of the renewable energy industry, and not finalizing a clearly flawed proposal that would have had major ramifications for the US economy and the climate. We now look forward to working with the agency to maintain a strong RFS. The biofuels industry has grown in the United States because of a predictable and supportive federal policy…We made these strategic choices because America's Renewable Fuel Standard was strong, stable and clear. The EPA now has a great opportunity to restore confidence in the Obama administration's clean energy and climate agenda by returning to its historical administration of the RFS.”

-Biotechnology Industry Organization President and Chief Executive Officer Jim Greenwood said his group supports any effort by EPA to start over on the 2014 RFS.

“We appreciate that EPA will not be finalizing a proposed 2014 RFS rule containing a flawed methodology for setting the renewable fuel volumes. We will continue to work with the agency to get this successful program back on track as soon as possible…Unfortunately, the delay in this year's rule already has chilled investment and financing of future projects, even as first-of-a-kind cellulosic biofuel plants are right now starting up operations. The industry needs a final rule that is legally appropriate and continues to support our efforts.”

-Mike Lavender, Environmental Working Group policy analyst said Congress should undertake RFS reform.

“Today's announcement is further evidence that Congress must reform our badly broken food-to-fuel policies. By failing to reduce the amount of corn ethanol blended into gasoline, the Obama administration today missed an opportunity to immediately reduce greenhouse gas emissions.”

-Iowa Gov. Terry Branstad and Lt. Gov. Kim Reynolds said in a statement that EPA made the right decision to delay the 2014 RFS.

“Across the nation, renewable fuels have helped spark economic development, create jobs, reduce our dependence on foreign oil and increase consumer choice. While we would have liked to see the Environmental Protection Agency commit to a robust Renewable Fuel Standard for the long-term, we received a clear signal through this process that America supports renewable fuels and our state's work to produce high-quality biofuels.

“Though we were hoping for the certainty of a robust Renewable Fuel Standard, we're pleased the Environmental Protection Agency backed away from their initial proposal.”



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Posted by Jami Howell

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