Ethanol Could Save Farm Economy, POET CEO Says
With crop prices depressed, the best solution for a struggling farm economy would be allowing expansion of 15% ethanol-gasoline blends, the leader and founder of one of the world’s largest ethanol companies told the Iowa Biotechnology Association in Ankeny, Iowa, Wednesday.
Biofuels have been the only significant growth market for corn over the past two decades, said Jeff Broin, the founder and CEO of POET, an ethanol producer with headquarters in Sioux Falls, South Dakota.
Broin, who is also chairman of the ethanol trade group Growth Energy, was among a group of ethanol and oil industry leaders who met with President Trump on March 1. The president attempted to broker a dispute between oil companies and agricultural interests. Some oil refiners that don’t blend ethanol into gasoline are blaming the high price of buying credits, called RINs, for threatening their business. Under the Renewable Fuel Standard, blenders using ethanol accumulate RINs (Renewable Identification Numbers) that they sell to oil companies not blending ethanol. Ethanol supporters, including Iowa’s Senators Charles Grassley and Joni Ernst, argue that any effort to cap prices for RINs would make ethanol blending under the Renewable Fuel Standard unworkable and would hurt farmers by depressing corn prices.
Agriculture Secretary Sonny Perdue on Tuesday suggested that the White House may let Congress resolve the dispute.
Broin told reporters later on Wednesday that he doesn’t agree.
“I think handing this over to Congress would be a mistake,” Broin said. Instead, Broin hopes for an administrative solution, including a ruling by the EPA that would allow E15 to be sold year-round. Currently, in some markets the fuel can’t be sold in summer months to vehicles that aren’t equipped to burn higher blends.
“The president seemed very supportive of agriculture,” Broin said. “He was interested in E15 nationwide and he was also interested in some short-term protection for the refiners until the E15 market grows enough to give them some relief.”
Greater sales of E15 would eventually expand the market for ethanol by 7 billion gallons, Broin said, which would create demand for more than 2 billion bushels of corn in the U.S. It would also generate more of the RINs traded between oil companies and retailers, which would lower their prices for some refineries.
Falling Farm Incomes
To his audience in Ankeny, Broin painted a bleak picture of the Midwest agricultural economy, which reminded him of the hard times on South Dakota farms when he was a teenager in the 1980s.
Global increases in grain production have depressed prices, he said. Between 2013 and 2016, farm income has fallen 50%, the worst decline since the Great Depression, he said, and J.P. Morgan is predicting that 10% of Midwest farms could go out of business this year.
“People are literally betting the farm during a time when prospects for future success are grim,” he said.
“If history is our guide, exports are not the answer for America’s farmers,” he said.
Greater efficiencies in livestock feeding show that meat production may not be a growth market for corn and other commodities, either.
Biofuel Best Bet for Demand
Broin sees biofuels and other chemicals and products derived from starch as the best potential for better demand.
“Based on the data, we represent the only significant opportunity for better market prices going forward,” he said.
Ethanol already represents about 40% of the market for corn, Broin pointed out, adding that he’s surprised that many farmers don’t know how significant the fuel is to their bottom line.
Although farm groups are also encouraging the Trump administration to support ethanol and not cap RIN prices, Broin would like to see more support for efforts to promote ethanol to the public and in the marketplace.
“In the last few years we’ve actually seen decreasing support from commodity groups for ethanol initiatives, at a time when we could have been ramping up,” Broin told Agriculture.com.