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A silver lining to potential RFS cuts

Jeff Caldwell 01/06/2014 @ 8:23am Multimedia Editor for Agriculture.com and Successful Farming magazine.

The potential slashing of the federal ethanol mandate isn't all bad news for the corn market, one economist says.

The U.S. Environmental Protection Agency late last year proposed paring back the federal Renewable Fuels Standard (RFS), largely citing a growing gap between the mandated amount of ethanol and the "blend wall." The potential cuts met widespread resistance in the ag sector, and the verdict is expected to come later this month.

While there's been widespread speculation about the negative implications to the corn market based on a curtailing of the mandate, there is one bright spot in such a course of action, says University of Illinois Extension ag economist Scott Irwin. In fact, could a lighter RFS give the corn trade a bullish jolt of life?

"The sharp reduction in the advanced mandate in combination with a constant biodiesel mandate means there will be little need for ethanol imports from Brazil," Irwin says. "This is actually a small win for the corn market."

Then there's the amount of corn moving into ethanol production: "Corn used for ethanol in 2014 is unlikely to be substantially impacted by the rule-making," Irwin adds.

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