February 16, 2014
BY Tom Bryan
Throughout the 60-day public comment period on the U.S. EPA’s proposed reductions to 2014 renewable volume obligations (RVOs), the agency received thousands of pleas from American farmers and biofuels producers who voiced a litany of concerns over curtailed biofuels blending. Retreating from the schedule of the renewable fuel standard, they said, could delay E15 implementation, interrupt E85 infrastructure, destroy advanced biofuels market incentives, and discourage innovation and investment. Many of them also said lowering the blending requirement would reduce the price of corn.
In this issue, we look closely at the latter assertion—that reducing 2014 RVOs might put downward pressure on corn prices—while also examining the high cost of corn production. We discover that certain farming expenses, like land rents, may be decreasing this year, but perhaps not enough to make up for the possibility of $4 corn. As EPM Staff Writer Chris Hanson reports in “Production Price Up,” the bloated outlays of growing ethanol’s principal feedstock, including the cost of fertilizer, seed, acreage and accelerated machinery depreciation, have probably ushered in a higher breakeven point for growers.
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With greater production expenses and new breakeven points in mind, we look at the relationship between corn’s market price and lower-than-statutory ethanol blending. In “Obligation Outcomes,” we see that industry observers think ethanol blending—up to 10 percent—is so deep-seated into America’s transportation fuel supply that even removing the RFS wouldn’t stop it now. So reducing RVOs this year would do little to corn prices, they say, but it would stall advanced biofuels, prolong the E10 blend wall and, along the way, score a victory for Big Oil.
This month’s focus on corn also takes us inside Green Plains Renewable Energy’s corn storage strategy. EPM Senior Editor Susanne Retka Schill reports that Green Plains is aiming for an enormous storage capacity, large enough to provide its 12 ethanol plants with a 45- to 60-day feedstock supply.
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Increased storage capacity will be compulsory for a lot of folks if Dave Nanda’s corn yield predictions come to fruition. As Hanson reports in “Fields of Dreams,” the crop consultant’s vision for 500-bushel-per-acre corn may soon be in reach. If today’s award-winning yields do become tomorrow’s average crops, it sure will be interesting to see what it does to the price of corn and the cost of its production.
CoBank’s latest quarterly research report, released July 10, highlights current uncertainty around the implementation of three biofuel policies, RFS RVOs, small refinery exemptions (SREs) and the 45Z clean fuels production tax credit.
The USDA significantly increased its estimate for 2025-’26 soybean oil use in biofuel production in its latest World Agricultural Supply and Demand Estimates report, released July 11. The outlook for soybean production was revised down.
The U.S. Energy Information Administration maintained its forecast for 2025 and 2026 biodiesel, renewable diesel and sustainable aviation fuel (SAF) production in its latest Short-Term Energy Outlook, released July 8.
XCF Global Inc. on July 10 shared its strategic plan to invest close to $1 billion in developing a network of SAF production facilities, expanding its U.S. footprint, and advancing its international growth strategy.
U.S. fuel ethanol capacity fell slightly in April, while biodiesel and renewable diesel capacity held steady, according to data released by the U.S. EIA on June 30. Feedstock consumption was down when compared to the previous month.