Biofuels groups fight proposed cuts in US ethanol blending rates

05 October 2011 18:39  [Source: ICIS news]

HOUSTON (ICIS)--Several US biofuels and agriculture organisations criticised on Wednesday legislation that could cut or eliminate the amount of ethanol blended into gasoline, as called for by the Renewable Fuels Standard (RFS).

"Reducing America’s consumption of renewable fuels based upon arbitrary, pre-determined thresholds for corn demand and supply ratios is unnecessary and may lead to higher prices at the pump," warned a group of biofuel organisations.

The groups included the American Coalition for Ethanol (ACE), the American Farm Bureau Federation (AFBF), Growth Energy, the National Corn Growers Association (NCGA), the National Farmers Union (NFU), the National Sorghum Producers and the Renewable Fuels Association (RFA). 

The groups’ warning came in a letter sent to representatives Bob Goodlatte (Republican-Virginia) and Jim Costa (Democrat-California) following the introduction of their legislation, which would cut or eliminate the volumes of renewable fuel use required by the RFS if the corn stocks-to-use ratio falls too low.

The corn stocks-to-use ratio is the percentage of corn crop remaining after the expected demand is met.

The US corn stocks-to-use ratio reached an estimated 5% in August, the lowest since the record of 3.7% in 1995-1996, according to the US Department of Agriculture (USDA).

The RFS mandates the use of 15.2bn gal (57.5bn litres) of ethanol in 2012, rising to 36bn gal in 2022.

Addressing concerns over high corn prices, the groups wrote: “Numerous studies have concluded that the RFS is a minor contributor to corn prices. The most recent study, 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."

The groups also highlighted the inherent risk associated with tethering public policy to frequently changing corn stocks-to-use data reported by the USDA.

According to University of Illinois economist Darrell Goode, the stocks-to-use ratio should only be considered as a starting point for estimating potential price impacts.

The relationship between stocks-to-use and price is not consistent over time and should not be used as the basis for policy, the groups stated.

By: Frank Zaworski
+1 713 525 2653



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