The South Dakota Corn Growers Association, which represents 12,000 farmers, strongly opposes a waiver of the nation’s Renewable Fuel Standard (RFS).
The organization has submitted comments to the Environmental Protection Agency in opposition to waiver requests made by several Southern states that are concerned about the current high price of corn. The RFS program, part of the U.S energy policy, requires designated amounts of renewable fuel to be blended in gasoline.
“A waiver would do more damage than good. The RFS encourages domestic production of ethanol and has greatly reduced the need for imported oil. Ethanol plants provide jobs, create economic growth in rural communities, and strengthen the farming industry,” SDCGA President Mark Gross said. “The severe drought throughout the nation’s agricultural heartland is what’s directly responsible for rising grain prices. The economic damage of the drought has been done and can’t be reversed.”
Despite the widespread drought, the nation will produce enough corn to meet demand for feed and fuel, the corn groups said. In addition, there are nearly 800 million gallons of ethanol in reserve, providing additional assurance that the RFS will be met.
“South Dakota farmers set out to produce a record corn crop, which didn’t happen because of one of the worst droughts in state history,” Gross said. “The good news is that thanks to improvements in seed biotechnology and the increased adoption of reduced tillage farming practices, we should still produce the state's sixth-largest corn crop on record.”
South Dakota has 15 ethanol plants with a capacity to produce more than 1 billion gallons of ethanol annually. The state’s ethanol industry directly employs nearly 900 people. Ethanol is blended into gasoline to increase octane.
The Clean Air Act allows national volume requirements to be waived only if they would severely harm the economy or environment of a state, region, or the U.S., or if the administrator determines the domestic supply of renewable fuel is inadequate.
Gross said the nation has an adequate supply of domestic ethanol. They also say the waiver requests, which cite rising feed expenses for livestock producers, fail to provide any evidence the RFS is causing economic harm. Corn prices rose as the nation’s drought worsened.
An Iowa State University study estimates that if the RFS were to be waived, the average corn price would drop only 28 cents per bushel. The RFS increases corn production and creates a global market for corn. Since the RFS was enacted in 2005, five of the six largest corn crops of all time were grown in the United States, according to USDA statistics.
In South Dakota, corn acres increased from 3.8 million acres in 2001 to 5.2 million acres in 2011. The state’s average yield rose from 109 bushels per acre in 2001 to 132 bushels per acre in 2011. World corn production grew from 23 billion bushels in 2000 to 35 billion in 2011.
A Purdue University study concluded that if the 2013 average corn price is $8 per bushel and crude oil is $100 a barrel, a waiver would have little or no near-term impact on ethanol demand and corn prices because refineries don’t have access to cheaper sources of octane.
Any reduction in the amount of corn produced for ethanol would also reduce the amount of dried distillers grains (DDG), which are added to livestock feed. A limited supply of DDG would also increase demand for more corn in feed rations and likely negate savings from any reduction in corn prices.