Beyond RFS: A New Deal for Farmers

The Renewable Fuel Standard (RFS), by which Congress for 21 years has mandated corn ethanol be blended into U.S. motor gasoline, is widely viewed as an untouchable third rail of politics. The Midwest Corn Belt Caucus is as intensely energized against any attempt to roll it back as they are to invent new legislative strategies to further subsidize corn production. But the crony corporatism of current corn agriculture is unhealthy for the soul and disadvantages the dwindling number of small family farms. The manipulation of national agriculture markets most closely approaches Soviet-style central control in how corn production is steered by 5-year farm bill subsidy packages and consumption is directed with annual ethanol blending quotas. The farmers who actually grow the crops have little economic leverage and remain price-takers in a national commodity futures market that they access through a very limited number of local buyers. The current state is a demoralizing reality reflected in the appalling rate of farmer suicides currently running 3.5 times higher than the national average according to CDC and National Rural Health Association data.

Whatever conservative farmers decided at the polls in this week’s midterm elections, it was not for any lack of support for RFS from this administration. In successive Octobers, Trump’s EPA has moved to fully reallocate 100% of small-refinery exemption volumes so that not a drop of mandated ethanol production and Renewable Identification Number (RIN) generation would be lost. This administration has advanced implementation rules for the new Section 45Z Clean Fuel Production Tax Credit that resurrects the pre-RFS approach of direct subsidies for biofuels while still retaining the RFS consumption mandates. Trump and his cabinet also supported the House-passed Nationwide Consumer and Fuel Retailer Choice Act that would allow year-round E15 gasoline by increasing the Clean Air Act exemption for smog-generating ethanol emissions already granted to E10. This past March, the EPA Set 2 rule established the highest biofuel consumption Renewable Volume Obligations in the program’s history. Farm groups and ethanol trade associations have hailed each step as a win for American farmers and rural economies. Equity markets have been more precise about the beneficiaries. When EPA announced the reallocation proposal last October, shares of Green Plains rose roughly 7% the same day; Darling Ingredients, Archer Daniels Midland, and Bunge also advanced sharply. These companies have repeatedly cited RFS certainty and 45Z credits as material to their profitability margins and capacity decisions.