Ethanol industry on the offensive after August recess

By Susanne Retka Schill | September 05, 2013

In a Thursday morning media call, ethanol industry leaders firmly reiterated their position that there is no need to modify the renewable fuels standard (RFS). Renewable Fuels Association President and CEO Bob Dinneen and Growth Energy CEO Tom Buis were joined by Paul Bertels, vice president of production and utilization for the National Corn Growers Association, and Delayne Johnson, general manager of Quad County Corn Processors.

In spite of the campaign by Big Oil claiming the RFS needs to be scrapped because it’s driving up the price of food, Dineen pointed out that in his travels during the August congressional recess, “it is belied by the facts on the ground.”

Bertels put numbers behind that observation. Even using the most conservative projections at this point that incorporate the expected dip in yields in Minnesota, Iowa and Illinois from the dry August, Bertels said the harvest should bring in about 12.9 billion bushels of corn, the third largest crop ever and just 100 million bushels below the record. “Bids for October/November delivery at $4.71 per bushel are well below last year’s,” he added. While that will translate into lower costs for livestock feeders, it may not for consumers. Bertels said beef prices aren’t expected to drop, “That has nothing to do with the price of corn, but rather due to drought in the Southwest.” Pork and poultry numbers are expected to expand, but prices are likely to be affected more by exports than corn prices, he added.

In response to the oil industry’s protestations that they should not be required to buy cellulosic biofuel that doesn’t exist, Dinneen pointed out that the first cellulosic ethanol plant in the U.S. built by IneosBio just announced commercial production in August. The traditional corn ethanol industry has the potential to produce about 2 billion gallons of cellulosic ethanol from the same corn kernels used now by the industry, Johnson reported. Quad County Corn Processors has broken ground on an addition to its 35 MMgy plant in Galva, Iowa, to convert the fiber left in the corn kernel into cellulosic ethanol. Not only will that add 6 percent to the gallons of ethanol produced at the plant, but the process increases the amount of extractable corn oil while boosting the protein value of the distillers grains feed coproduct by 40 percent. “It’s a triple win for the industry,” he said, that will help with the transition to second generation biofuels.

Big Oil’s argument that the RFS needs to be scrapped because the blend wall has been reached and is driving up costs is not valid, Buis said. “Everyone knew when this law was passed that to get to 36 billion gallons [of renewable fuels] would require higher blends.” During the four and a half year fight to get E15 into the marketplace, “Big oil has tried to erect every regulatory and legal barrier. And they’ve lost every round. Let consumers make a choice,” he continued. “In Brazil they can, they can choose a blend of 25 percent or straight gasoline.”

Other arguments against ethanol are being proven wrong by the facts, Buis stressed. “We’ve seen the chicken council, for example, complain we’re driving up the price of chicken,” he said. “In the last few weeks their earnings reports have shown record profits.” Similarly, while many in the oil industry are screaming about the high cost of renewable identification numbers (RINs), others are showing RINs profits in their earnings reports.

Dinneen raised the question of whether the entire RINs issue is politically motivated and not market driven. “RINs prices fell precipitously when Congress left Washington,” he pointed out. The fact that there appeared to be no market driver for the drop in the opaque and thinly traded RINS market led to the question of whether it was being manipulated for political reasons. Dinneen offered to share the accompanying chart illustrating the issue to the reporters on the media call.