How dependent are U.S. farmers’ incomes on ethanol and other biofuels?
Very, according to a new report from the National Corn Growers Association and the National Farmers Union.
“After nearly a decade of improving farm incomes, much of it a result of increased market opportunities for corn, USDA projects 2015 net cash income will decline by $35 billion from the 2013 highs,” the report says. “The net farm income projection for 2015 at $58.3 billion is down more than 50% with the record $123.7 billion level achieved in 2013 and is the lowest since 2006.”
That’s a big drop, and Chip Bowling, president of the National Corn Growers Association, believes the ongoing uncertainty about the renewable fuel standard cannot be ignored as a factor.
“When the renewable fuel standard came onboard in 2005, that was an awesome increase in farm income for whatever type of farming you were doing—corn, soybeans cotton, wheat—and now livestock is enjoying those benefits,” he said on AgriTalk recently. “…We had low crop and commodity prices for years and years and before the RFS. The RFS has basically made a new potential for use of corn and byproducts that we hadn’t seen in a long time. Our trade was flat. Our livestock feed use was flat. And here comes the renewable fuel standard, and we’re grinding corn to make fuel.”
Listen to Dowling's comments on the RFS starting at the 17-minute mark:
Corn prices certainly responded to the increased demand. “We saw corn getting to almost $8,” Dowling said. “That’s not what we’re looking for—that’s not sustainable.” But, he pointed out, neither are the current prices, which are below the cost of production for many farmers.
When might this issue get resolved? EPA has said it would finalize the volume requirements by Nov. 30. Until then, though, the biofuel industry—and the farmers who produce grain and other materials for it—will just have to get comfortable with living in RFS limbo.
How much do you think uncertainty about the RFS is affecting corn demand and crop prices at your farm? Let us know in the comments.