Trump Administration to Loosen Rules on Sales of Fuel Ethanol
Oct 9, 2018
Move on blends could boost demand for corn amid oversupply in grain markets
Gregory Meyer in New York, 10-9-18, The Financial Times
The Trump administration intends to loosen rules inhibiting domestic sales of fuel ethanol, a move that could build demand for corn as US agriculture struggles with oversupplied grain markets.
The technical shift would allow the year-round sales of E15, or motor fuel containing 15 per cent ethanol and 85 per cent petrol, according to reports. Most fuel blends today contain no more than 10 per cent ethanol.
More than a third of this year’s US corn crop is expected to be consumed by ethanol refineries, underlining the biofuel’s importance to growers. President Donald Trump was expected to highlight the proposed policy switch at a rally late on Tuesday in Iowa, the leading US state in ethanol output and scene of competitive congressional and gubernatorial elections next month.
“He is fulfilling his promise by providing clear policy direction that will expand opportunities for our nation’s farmers, provide certainty to our refiners and bolster the United States’ role as a biofuels powerhouse,” said a spokesman for the Environmental Protection Agency, which administers rules related to biofuels blending.
Domestic ethanol use is already supported by legislation requiring minimum amounts to be blended each year. But rapid growth has begun to plateau because of static petrol demand and the fuel industry’s reluctance to blend ethanol above 10 per cent.
Ethanol blends above 10 per cent have been constrained by EPA rules that limit sales of E15 between June 1 and September 15, because of concerns about the fuel evaporating in the summer heat to create smog. Fuel retailers have baulked at installing pumps that require switching fuels twice a year, leaving only about 1,400 dispensers able to pump E15 across the country, according to Growth Energy, a biofuels trade group.
The ethanol industry is forecast to use 5.65bn bushels of corn in the marketing year that began September 1, according to the US Department of Agriculture. Emily Skor, Growth Energy chief executive, said: “Year-round sales of E15 nationwide could deliver demand for 2bn bushels of American corn and help restore growth in rural communities.”
Corn prices fell, however, with the CBOT December contract off 0.5 per cent at $3.64¾ in early trading on Tuesday.
Bill Lapp of Advanced Economic Solutions, a consultancy, said the outcome of any policy change was uncertain as oil interests were likely to fight it in court. Retailers would also need to invest heavily to add E15 fuelling infrastructure.
“This is maybe the opening of something bigger down the road,” he said. “But for the next 12 months I don’t expect it to have anything more than minimal effects on the amount of ethanol consumed in the US, and little impact on the corn market.”
James Lucier, an analyst at Capital Alpha Partners, a political risk advisory group, described any change as “far off”.
The move comes after Mr Trump has made other decisions that have vexed the agricultural sector. China has increased tariffs on US ethanol, shutting it out of a promising foreign market, in response to new tariffs from Washington. The EPA has also handed out dozens of exemptions from biofuels blending to US oil refiners.