Ethanol policy, once the fav-ourite child of American legislators, has become such a tinderbox of conflict that it seems no one wants to touch it.
However, problems with American ethanol policy must eventually be addressed, and when they are it will affect corn demand.
Canadian farmers have an interest in how this plays out because the corn market is the bedrock of all grain markets.
The U.S. Environmental Protection Agency said last week that it was delaying its decision to set the corn ethanol mandate for 2014 until next year. That’s not a misprint; they are going to wait until next year to set this year’s mandate.
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The EPA’s decision to delay provoked a Buffalo-like snowstorm of news releases from interested parties, ranging from outrage to support to calls for legislators to revamp the whole program.
The history of this goes back about a year.
Last November, the EPA proposed reducing the 2014 mandate to 13 billion gallons from 14.4 billion.
The Renewable Fuels Association estimated that would reduce American corn demand by 500 million bushels.
The EPA argued that sticking to the 2007 law that set out a scheduled annual increase in the ethanol mandate would have outstripped the ability of America’s gasoline supply to accommodate the mandate at a blend rate of 10 percent.
Oil refiners support the idea of reducing the mandate, arguing the system that is used to regulate compliance is expensive and threatens the viability of some east coast refineries.
Some environmental groups are against the mandate, arguing ethanol generates more greenhouse gas than it saves.
Livestock feeders are also against increasing the ethanol mandate, arguing that ethanol’s heavy demand on corn elevates the grain’s price.
Ethanol production uses up 36 percent of America’s corn crop.
Ethanol makers and corn and soybean organizations support the mandate and argue that the fuel supply can accommodate it if the blending rate increases to 15 percent.
They also say that more pumps serve E-85, which is the 85 percent blend that flex fuel vehicles can use.
The EPA’s proposal for cutting the mandate went up for public comment, and a final decision was scheduled for February, then de-layed until June, and further delayed until September.
Now it’s expected sometime next year.
The EPA says its proposal to cut the mandate generated 340,000 public comments, and the ongoing consideration of these issues forced it to delay making a final decision.
It will attempt to get caught up on the annual mandates by releasing targets for 2014-16 in the new year.
Trimming the mandate would weigh down corn prices, which are already weak because of the huge U.S. crop.
However, returning to the increases set out in the 2007 law would be positive for corn and potentially for soybeans by also triggering more biodiesel production.
Much rides on the decision, and everyone hopes the EPA soon screws up the courage to make one.
d’arce.mcmillan@producer.com
