Mar 12, 2017
Last week at the Commodity Classic, I joined Mike Adams on AgriTalk along with Chip Flory from ProFarmer and Bob Dineen from The Renewable Fuels Association - the ethanol industry group.
The topic was the ongoing drama over an Executive Order concerning the point of obligation for RIN certificates - Renewable Identification Numbers. At this point it would be helpful to give a brief, clear description of the basics of this debate.
Only I can't, and as near as I can tell nobody else can. The best information I've found is the work of Scott Irwin at the University of Illinois, and I can't make it through one of his papers without my eyes glazing over.
The bottom line for me is the biofuels market in an insanely complex and artificial creation of government regulation that even the participants cannot fully comprehend. When I asked Bob whether the RFA had tried to model or predict what the executive order might do to the ethanol marketplace, what I heard was the consequences were essentially unknowable.
Irwin suggests that over the long run it should not make any difference, calling to mind that old quote from famed economist John Maynard Keynes, "In the long run we are all dead."
So my takeaway for the still ongoing turmoil in the ethanol industry and markets is we farmers have based a serious chunk of our business model on commercial activity that is shrouded in regulatory illogic, subject to the whims of an unpredictable administration, and not fully understood by anyone involved.
We've been here before with the infamous CDO's - Collateralized Debt Obligations - the arcane mortgage instruments that brought down Wall Street in 2008. By the time you see this, more fireworks may have taken place in the biofuel political arena. Corn farmers may keep murmuring, "The RFS is safe,” but I think it will take more than that to convince ourselves in the weeks ahead.