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Ethanol Advocate: Waiving RFS Will Not Lower Grain Prices

When asked if the Renewable Fuels Standard should be waived due to drought-spiked corn prices, Tom Buis did not mince words. "Waiving the RFS will have a minimal impact on grain prices," said Buis, speaking to Farm Progress reporters at the outset of the 2012 Farm Progress Show held in Boone, Iowa this week. Buis is CEO at Growth Energy, an ethanol advocacy organization.

Earlier this summer several governors, along with livestock groups, called on the Environmental Protection Agency to waive the Renewable Fuels Standard, which mandates the use of 13 billion gallons of renewable fuel in the nation's fuel system.

Buis says the RFS already includes flexibility for various situations including severe weather conditions. When blenders make more ethanol than is required they get RINs, or credits, that can be used in times   when economics make ethanol production less profitable.  In addition, critics of RFS do not provide accurate corn acreage displacement for ethanol. While as much as 40% of corn does go into making the fuel, only 16% of net acreage is actually needed for ethanol due to coproducts like DDGS, a common livestock feed.

"Even more important, I don't think we want the government deciding who gets the corn," says Buis. "The market will sort it out through supply and demand. Ethanol production is down around 10% and USDA is projecting ethanol production to be down 10%. But there's also less demand from livestock being sold off. Prices will eventually moderate. The cure for high prices is high prices."

Buis contends the drought would have been far more crippling to the livestock industry had the ethanol industry not been developed. "Ethanol helped build higher corn acreage, among other things," he says.