NFU, NCGA: RFS uncertainty drives down US farm income

By Susanne Retka Schill | October 08, 2015

In continuing pressure on the administration and U.S. EPA to not weaken the renewable fuels standard (RFS), the National Corn Growers Association and National Farmers Union released a white paper  showing the impact of the RFS on farm income, which is now projected to decline 26 percent this year from the 2103 peak.

The paper cites a Congressional Research Service report that called the lack of annual renewable fuel volume standards for 2014 and 2015 a key uncertainty that was “crucial in determining how the U.S. agricultural economy will fare.” USDA projects 2015 net cash income will decline $35 billion from 2013 highs. “The net farm income projection for 2015 at $58.3 billion is down over 50 percent compared with the record $123.7 billion level achieved in 2013 and is the lowest since 2006.”  

In a media call the morning of the release, Roger Johnson, President of the National Farmers Union said, “The EPA’s proposed rule and the uncertainty around it have frozen investment in rural communities and sources of income for farmers in the advanced and cellulosic biofuels industry at a crucial time. Already, the new industry has suffered a $13.7 billion shortfall in investment because of uncertainty around the RFS. That cuts off a long-term potential for supplemental farm income, and causes job loss in rural communities. The economic and environmental benefits of advanced biofuels cannot be realized without a strong RFS.”

President of the National Corn Growers Association Chip Bowling said, “Our country’s farmers and biofuels producers have met the challenges of the RFS, investing in renewable fuel production and creating jobs in rural America that can’t be outsourced to other countries. Thanks to the RFS, we are helping to reduce foreign oil dependence with clean, secure American-made renewable fuel. However, the EPA’s weakened proposed rule has hurt farm income across the country – the USDA has projected net cash income for American farmers and ranchers to decline by 26 percent this year. Now is not the time to break our commitment to America’s farmers. It’s time to put forth a strong RFS so we can continue moving our country forward and bolster farm income in our rural communities.”

In the question period following the prepared statements, both leaders acknowledged that the uncertainty around the RFA is not the only reason farm income is declining, although Johnson stressed, “it is a significant factor.” Bowling pointed out, however, that the boost in farm income starting in 2005 has widely been credited to corn ethanol. He added that he farms near an ethanol plant that shut down recently, with an immediate drop in the basis—basis being the price differential between the nearby futures corn price and a local cash quote.

Growth Energy cochairman Tom Buis commended the two agricultural organizations “for bringing this issue to the forefront to ensure that communities across rural America can continue to grow and prosper.” He reinforced the key message from NCGA and NFU. “Farm income has already declined this year and the proposed reduction of the RVOs under EPA’s proposed RFS rule will only further drive down farm income, putting a severe strain on America’s rural economy. The past several years of inaction by EPA have resulted in significant uncertainty among producers, stifling growth, innovation and the necessary investment to move toward next generation fuels from the farm.”