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March 2013 Archive for PFA Pioneer Blog

RSS By: Chip Flory, Pro Farmer

This is a private blog for Pioneer.

Stage set for real debate on RFS

Mar 22, 2013

Pro Farmer Extra

- From the Editors of Pro Farmer newsletter -

March 22, 2013

Pro Farmer Associate Editor Meghan Pedersen and Washington consultant Jim Wiesemeyer offer up their perspectives on the challenges facing the ethanol industry.

RIN volatility raises concerns about gas prices


Recent volatility for ethanol Renewable Identification Numbers (RINs) has spurred lawmaker and industry reaction. Earlier this month the credits traded above $1 per gallon as tightening ethanol supplies and mandates to blend renewable fuels resulted in high demand for these blending credits.

Last week Senator David Vitter (R-La.), the top Republican on the Environment and Public Works Committee, and Sen. Lisa Murkowski (R-Alaska), ranking member of the Energy and Natural Resources Committee, asked Gina McCarthy, nominee to lead the Environmental Protection Agency (EPA), to outline “how she will protect American citizens from rising gas prices due to the rising cost of ethanol RINs.”

The Wall Street Journal Online reports, “Valero Energy Corp. said it will have to spend two or even three times as much as it did last year to comply with the federal ethanol-blending requirement due to the high prices of credits it needs to buy under the law.” House panel examines RFS Launching a bipartisan review of the Renewable Fuels Standard (RFS), the House Energy and Commerce Committee released its first in a series of white papers that will examine a number of issues emerging with the current system and solicit input from interested stakeholders.

Noting that it has been more than five years since the RFS was revised and that in some ways RFS has not unfolded as expected, the white paper notes“Several implementation challenges have emerged that received little if any consideration prior to passage of the Energy Independence and Security Act of 2007.

Furthermore, the overall energy landscape has changed since 2007. It is time to undertake an assessment of the RFS.” The first white paper addresses the so-called “blend wall,” or the point at which adding the required volume of ethanol to gasoline supplies would result in ethanol blends that exceed 10%, which is the maximum ethanol content approved for sale for use in all vehicles.

Because gasoline demand has declined in recent years and ethanol targets have continued to rise, the blend wall is approaching much faster than anticipated. The required volumes of ethanol as set by the RFS must now be added to a smaller-than-expected pool of gasoline; many experts predict the 10% blend wall may be reached as soon as this year. While blends containing up to 10% ethanol (E-10) have long been used, refiners may need to start producing E-15 to stay in compliance. The approaching blend wall raises several issues for producers, refiners, auto manufacturers and fuel retailers. The white paper examines these and poses a number of questions for discussion.

The committee is requesting interested stakeholders to send responses to these questions by April 5, 2013.


Perspective: Total gasoline consumption this year is estimated at 134.8 billion gallons. At that, every gallon of gas would have to be a 10% ethanol blend to hit 2013’s mandated 13.8-billion-gallon usage. RINs would account for the remaining “use.” This year’s ethanol production, however, is on pace to hit about 12.6 billion gallons and grain-based ethanol use will be about 12.3 billion gallons, forcing RIN inventory down about 1.5 billion.

Follow Pro Farmer Editor Chip Flory on Twitter: @ChipFlory

To see more of what Pro Farmer has to offer, be sure to visit

CBO score challenges farm bill savings

Mar 08, 2013

Pro Farmer Extra

- From the Editors of Pro Farmer newsletter -

March 8, 2013

Pro Farmer Associate Editor Meghan Pedersen and Washington consultant Jim Wiesemeyer offer up their perspectives on the latest farm bill happenings this week.

CBO updates farm bill scores

House Speaker John Boehner (R-Ohio) told members of the Ohio Farm Bureau that he expects both the House and Senate to pass a farm bill this year. But the eventual farm bill will likely be quite different than either the Senate or the House Ag Panel 2012 versions. Reason: The Congressional Budget Office’s (CBO) February baseline update yielded far less favorable scores for last year’s proposals.

While both plans would still save money relative to continuing current policies, CBO says “the reductions would be significantly smaller than we estimated in 2012,” due to later enactment and “updated baseline projections for commodity prices, land conservation and nutrition spending.”

CBO indicates the Senate farm bill would bring total direct spending for affected USDA programs to $963 billion for 2014 -2023, or $13.1 billion in savings compared to continuing the current program. This compares to CBO’s prior estimate of $23.1 billion in savings for 2013-2022.

CBO now estimates the House farm bill spends $950 billion from 2014-2023, which represents savings of $26.6 billion relative to continuing current programs. CBO previously scored it as saving $35.1 billion for 2013-2022.
Sources indicate lawmakers may use this February baseline from CBO to score farm bill proposals rather than the more traditional March CBO baseline because the Obama administration has failed to release its Fiscal Year 2014 budget proposals that were due by law Feb. 4.

Major farm bill changes ahead

These lower savings numbers will likely necessitate key changes to 2012 farm bill proposals and possibly a quicker farm bill end zone. For one, the combined revenue-assurance and Supplemental Coverage Option (SCO) is now too expensive, especially in the Senate version. This means the shallow-loss payments program may be nixed or significantly altered in favor of focusing on crop insurance, along with SCO, as the premier Title I farmer safety net. Reference (target) prices are likely to remain in the farm bill as the CBO’s score of the House farm bill showed little change since 2012 in these costs.

Higher costs for dairy

The updated scores also showed a surge in the cost of a gross margin dairy program with “optional” supply-management language. This means the program pushed by Representative Collin Peterson (D-Minn.), the alternative approach suggested by Reps. Robert Goodlatte (R-Va.) and David Scott (D-Ga.), and the Senate-passed dairy language will all require major changes to fit coming budget constraints.

As one observer notes, “The CBO numbers on dairy show that all three proposals cost money, rather than saving money, over 10 years... The idea that supply management is needed to stay within budget constraints has been exposed for what it is — a farce.”

SNAP costs on the rise

Another major problem for the Senate farm bill is that CBO’s update shows the Supplemental Nutrition Assistance Program (SNAP, formerly food stamps) will cost money rather than saving $4 billion, as previously estimated. The updated baseline also reflects reduced food stamp savings for the House farm bill, but contacts signal lawmakers have already found a way to bring the program savings figure back to the previous $16-billion target.

Combine CBO’s new farm bill scoring with near-record farm income, a 62% federal subsidy on crop insurance buy-up premiums, and the government’s $16.4-trillion national debt and it is clear major changes to previously proposed safety net, dairy policy and food stamp funding are coming.

Follow Pro Farmer Editor Chip Flory on Twitter: @ChipFlory

To see more of what Pro Farmer has to offer, be sure to visit

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