Senators urge USDA to aid biofuel industry with CCC funds

By Erin Voegele | April 07, 2020

A group of 15 senators sent a letter to Agriculture Secretary Sonny Perdue on April 6 urging the USDA to use funds allocated to the agency’s Commodity Credit Corp. by the CARES Act to provide financial assistance to the biofuel industry.

“We are concerned about our nation’s biofuel sector during the unprecedented economic circumstances brought on by the national pandemic of COVID-19,” the senators wrote.

The letter explains that that the pandemic has caused motor fuel use to rapidly decrease. “This dynamic comes on top of EPA’s failure to implement the RFS in accordance with the law, including the issuance of illegal small refinery waivers and the recent failure to enforce ethanol blending requirements,” the senators continued. “As the consumption of motor fuel continues to decrease in response to COVID-19, it is important to note that most U.S. gasoline contains at least 10 percent ethanol.”

“We are concerned for the many farmers and producers who will bear the impact of this decrease in consumption, further damaging an already hurting rural economy and resulting in the closing of production facilities that employ many people in rural communities in our home states,” the senators wrote. 

Decreased fuel consumption has caused many biofuel plants to idle. The letter cites industry data that indicates more than 4 billion gallons of ethanol production has ceased production. “The CCC was created to stabilize, support and protect farm income and prices while also maintaining balanced and adequate supplies of agricultural commodities and aids in their orderly distribution,” the senators wrote.

“Farm income and prices for corn and other crop commodities are directly linked to the health of the renewable fuel industry,” they continued. “Ethanol plants use 40 percent of all corn grown in the United States. Among other feedstocks, biodiesel and renewable diesel producers currently use over 8 billion pounds of soybean oil a year, creating demand that adds 13 percent to the cash price of a bushel of soybeans. We have seen a significant drop in the price of corn and soybeans because of the decline in demand. Keeping plants open is vital for our states and we ask that you use the authority given by Congress to assist the biofuel industry during extremely difficult times. We are supportive of the proposals the biofuel industry has put forward to reimburse feedstocks and also believe that adding additional CCC funds to the Higher-Blends Infrastructure Incentive Program will drive future biofuel demand.”

The letter is signed by Sens. Chuck Grassley, R-Iowa; Tammy Duckworth, D-Ill,; Joni Ernst, R-Iowa; Tammy Baldwin, D-Wisc.; Deb Fischer, R-Neb.; Amy Klobuchar, D-Minn.; Roy Blunt, R-Mo.; Richard J. Durbin, D-Ill.; M. Michael Rounds, R-S.D.; Tina Smith, D-Minn.; Josh Hawley, R-Mo.; Sherrod Brown, D-Ohio; Ben Sasse, R-Neb.; Jerry Moran, R-Kan.; and John Thune, R-S.D.

Representatives of the biofuels industry have spoken out to applaud the senators for sending the letter.

“Once again, renewable fuel champions in the Senate are working tirelessly to stand up for an industry that is vitally important to rural America,” said Geoff Cooper, president and CEO of the Renewable Fuels Association. “We thank them for recognizing the unprecedented challenges facing ethanol producers today and seeking solutions to help our industry weather this storm. Ethanol prices have plunged to record lows, stocks are at all-time highs, and plants throughout the Heartland are shutting down. As ethanol serves as the largest market for U.S. corn growers, the well-being of the ethanol industry is directly linked to farm income and the livelihood of farm families across the nation. We agree with the senators that providing assistance to the renewable fuels industry would be an appropriate and timely use of emergency relief funding appropriated to USDA.”

Cooper noted that, as of April 6, 41 ethanol plants with an annual production capacity of 3.2 billion gallons have been fully idled, while 66 plants have reduced their output rates by a collective 1.8 billion gallons. Another 13 plants with 800 million gallons of capacity were closed or idled due to other factors prior to the onset of the COVID-19 pandemic. Overall, he said, a total of about 5.8 billion gallons of capacity is idle today, representing more than a third of the industry’s total production capacity. On an annualized basis, this would represent a potential lost demand for 1.7 billion bushels of corn.

“We applaud our Senate champions for their ongoing efforts to protect rural communities, where farmers and biofuel producers have been stretched beyond the breaking point,” said Emily Skor, CEO of Growth Energy. “The plunge in biofuel demand sparked by COVID-19 has generated a perfect storm, adding to the burdens created by a foreign price war over oil, continued trade barriers, and regulatory uncertainty here at home. Nearly half the industry may be offline within weeks, and without swift and decisive action in Washington, many more may soon halt grain purchases or close their doors completely. The USDA should act quickly to implement the urgent call from lawmakers and safeguard farm and biofuel jobs.”

A full copy of the letter can be downloaded from Grassley’s website.