RFA Warns Against Efforts to Relegislate Renewable Fuel Standard

The Renewable Fuels Association says relegislating the Renewable Fuel Standard will not achieve its goal of lowering feed corn prices.

Relegislating, repealing or reopening the Renewable Fuel Standard (RFS) at this time is bad policy, the Renewable Fuels Association (RFA) says. That includes the reportedly newest effort by Rep. Bob Goodlatte and Rep. Jim Costa to waive a portion of the RFS when the corn stocks-to-use ratio falls below an arbitrarily determined level. 

“Seeking to relegislate the RFS in this manner would do nothing to address the concerns raised by the livestock constituents of Reps. Goodlatee and Costa,” says RFA President and CEO Bob Dinneen. “Research clearly demonstrates that implementing an RFS waiver trigger based on the stocks-to-use ratio will not have the effects on corn prices desired by livestock and poultry interests, nor will it mean more corn is immediately available for feed use. Rather than knee-jerk policy reactions, Congress should maintain the integrity of the RFS to help drive job creation and wean America from its addiction to foreign oil.”

Recent studies have concluded that the RFS has been only a minor contributor to corn prices in recent years. A July 2011 analysis commissioned by the International Centre for Trade and Sustainable Development found that corn prices would have been exactly the same in 2009/10 if both the RFS and Volumetric Ethanol Excise Tax Credit (VEETC) had not existed.

Additionally, the stocks-to-use ratio has limited value as an indicator of expected market dynamics and price. University of Illinois economist Darrell Good cautions that stocks-to-use ratio should only be considered as “a starting point (for estimating potential price impacts) since very different supply and demand conditions in individual years can lead to similar ratios of stocks-to-use but very different prices.”

The RFA also cautioned that if this effort were to be successful, the loss of ethanol in the fuel supply would hammer American consumers at the pump. A study from the Center for Agriculture Development (CARD) this past spring estimated that the use of nearly 13 billion gallons of ethanol in 2010 kept gasoline prices $0.89 lower than they otherwise would have been. In the past decade, the average annual savings has been $0.25 per gallon, according to CARD.  

“If successful, reducing America’s use of its own domestic renewable fuel would wallop consumers at the pump, resulting in far greater economic pain than the marginal impact ethanol production has on grain prices,” says Dinneen. “In fact, given the disproportionate impact on food pricing exerted by energy and fuel prices, raising gas prices by reducing ethanol use would exacerbate concerns with rising food prices. This is simply the wrong policy to address corn supply concerns.”