Analysis: Renewable Fuel Standard uncertainty driving farm incomes lower

Analysis: Renewable Fuel Standard uncertainty driving farm incomes lower

Corn Growers, National Farmers Union release analysis of Renewable Fuel Standard impact on rural economy and farm income

The Renewable Fuel Standard was once a main driver for farm income and the rural economy, but EPA delay and uncertainty in proposing 2014-2016 RFS volume levels will drive down farm income and continue to hamper the rural economic situation, according to a new white paper from the National Corn Growers Association and the National Farmers Union, released Thursday.

Related: Renewable Fuel Standard trajectory concerns biofuels execs

The paper concluded that "EPA is causing uncertainty throughout the whole renewable fuel and agriculture value chains putting American jobs, innovation and investments at risk, and undermining the social and economic fabric of rural America."

Corn Growers, National Farmers Union release analysis of Renewable Fuel Standard impact on rural economy and farm income (Photo by Joe Raedle/Getty Images)

"After nearly a decade of improving farm incomes, much of it as a result of increased market opportunities for corn, the USDA projects 2015 net cash income will decline by $35 billion from the 2013 highs. The net farm income projection for 2015 at $58.3 billion is down over 50% compared with the record $123.7 billion level achieved in 2013 and is the lowest since 2006," the paper said.

Chip Bowling, NCGA president, said since 2005 when the RFS began, the whole farm economy saw a boost and every commodity saw their incomes rise.

In August, USDA projected net farm income in 2015 to decline by 26% from peak levels seen in 2013. In 2015, USDA projects that cash corn receipts will be off by more than $25 billion from their 2012 record, and down over $7 billion from last year.

Delayed RFS brings uncertainty
EPA has been considering for multiple years volume mandate levels for the RFS and now has been court ordered to release volume levels by Nov. 30. Bowling explained since the uncertainty that has come about from EPA not setting yearly levels, commodity prices have steadily been on the decline.

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Bowling shared that carryover stocks are expected to increase with another record-breaking crop. "Without a strong RFS, demand for corn is going to decrease," he said.

Bowling added that EPA had "pulled the rug out from under us" just when rural America was making great strides in economic development.

"Now more than ever they should be strengthening, not weakening the RFS," he said.

Related: Thousands weigh in on Renewable Fuel Standard proposed volumes

As long as EPA stays with its original proposal or decreases from the levels laid out in the law, he expects the farm economy to drop. "In just a few weeks we're going to find out if EPA's going to raise the levels. If they do raise it a little bit, I expect we will see an increase in commodity prices."

Roger Johnson, NFU president, added that EPA's indecisiveness has been a "major factor" for depressing corn values as well as creating a $13.7 billion dollars shortfall of investment for next-generation biofuels.

"The recent wavering on the RFS has also frozen investment in rural communities and new income streams for farmers related to advanced and cellulosic biofuels just as these products are finding their footing," Johnson said.

"Beginning with its attempt to undermine the RFS in a late 2013 proposed rule and its proposed rulemaking this year, EPA continues to stifle the growth in the renewable transportation sector," the paper noted.

"Farm income has already declined this year and the proposed reduction of the RVOs under EPA's proposed RFS rule will only further drive down farm income, putting a severe strain on America's rural economy. The past several years of inaction by EPA have resulted in significant uncertainty among producers, stifling growth, innovation and the necessary investment to move toward next generation fuels from the farm," said Tom Buis, co-chairman of Growth Energy.

See the full white paper, "Uncertainty on the RFS Is Driving Down Farm Income Across the U.S."

TAGS: USDA
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