The recent proposal by the Environmental Protection Agency (EPA) to lower the 2014 Renewable Fuel Standard (RFS) targets for biofuels will damage farmers and the rural economy. The RFS calls for increasing amounts of biofuels to be produced each year. This is the first time since the RFS went into effect that the EPA has lowered the requirement, and it reduces the total target by an astounding 16 percent. The specific corn ethanol requirement was slashed to a level below current production. NFU is extremely disappointed that the Administration decided to appease the oil industry and abandon its commitment to renewable energy.
EPA’s decision will particularly hurt corn farmers and livestock producers who use dried distillers grains (DDGs) for livestock feed. Costs of producing corn are increasing due to rising fertilizer costs and the price of oil. The U.S. Department of Agriculture (USDA) estimates that it cost $655/acre to plant corn in 2012. This requires the average farmer to receive $4.25 a bushel to cover the cost of production. However, at $4.17, the corn price is already below the break-even point for many farmers, and prices are falling.
The EPA’s new corn ethanol target will reduce demand for corn, putting a downward pressure on corn prices. In fact, in the period since the original EPA proposal was leaked in October, prices have already decreased. If corn prices fall to $3.50 a bushel, rural America would lose more than $10 billion in economic activity.
Corn prices will be pushed even lower as a result of the record corn crop that is being harvested this year. There is already a lot of corn out in the countryside that has yet to be sold, so any further decreases in price will particularly hurt smaller producers who are struggling to get by.
A healthy biofuels industry creates an additional market for corn farmers. It also supports more than 300,000 jobs nationwide, and most of these jobs are located in rural areas. Unfortunately, these jobs will be at risk with the EPA’s current proposal. EPA shouldn’t be lowering the biofuels levels; it should raise them! Higher RFS targets would be good for farmers, ranchers, biofuel producers and the rural economy.
Now is not the time to reduce the biofuels target, and it’s especially not the time to hurt farmers and the rural economy given our nation’s recovery from the recession.