A Publication of WTVP

As consumers in the U.S. economy, our energy choices are expanding. Gasoline, diesel, natural gas, geothermal, wind energy, ethanol, biodiesel, solar, hydroelectric… and the list goes on. Meanwhile, “fracking” is becoming a household name, as this method of recovering natural gas has developed exponentially in some areas of our country, such as the Bakken region in North Dakota. On the agricultural side, ethanol fuel (made from corn) and biodiesel (made from soybeans) has seen tremendous growth in the past decade. As average corn yields have steadily risen, it’s likely they will continue to climb as technology fine-tunes the industry and squeezes the air out of inefficiencies. In 2013, corn yields rebounded from the drought that hit the Midwest in 2012. In fact, we had a record production of corn in 2013—nearly 14 billion bushels. Just a decade ago, a 10-billion-bushel corn crop was a huge harvest.

What are we going to do with all this corn? One development that has basically saved the corn industry and kept markets from collapsing in the last decade is the ethanol industry. Ethanol is not a new fuel; Henry Ford used it in his Model T. In fact, Ford’s Model T was the first flexible-fuel vehicle, as it could run on gas, ethanol or a combination of both—and it likely could have run on any biofuel made from seeds or weeds that could be fermented.

Four decades ago, when Americans were waiting in line to fill up at gas stations, and three decades ago, when our country was swamped with corn surpluses, it was decided that lessening our dependence on foreign oil and decreasing burdensome corn supplies should be top priorities. Ethanol was the cure for both—it would lessen our dependence on energy imports and use up some of our bin-busting corn crops. It took several years for the gears to be set in motion, but in the late 1990s and early 2000s, ethanol plants throughout the Midwest sprung up, and production of the renewable fuel skyrocketed.

First, it was the large corn surplus; then it was an excess amount of a value-added corn product, ethanol. To help resolve the surplus supply, the RFS (Renewable Fuel Standard) was created under the Energy Policy Act of 2005. The original Renewable Fuel Standard required 7.5 billion gallons of renewable fuel to be blended into gasoline by 2012. This would use 2.5 billion bushels of corn, as three gallons of ethanol can be made from one bushel of corn.

Soon, it became evident that farmers were going to grow enough corn to satisfy the 7.5-billion-gallon requirement and still have large stockpiles left. In 2007, the Energy Independence and Security Act established RFS2, which increased the volume of renewable fuel required to be blended into transportation fuel from nine billion gallons in 2008 to 36 billion gallons by 2022. RFS2 laid the foundation for achieving significant reductions of greenhouse gas emissions, reducing imported petroleum, and encouraging the further expansion of our nation’s renewable fuels sector.

Under the RFS2, 14.4 billion gallons of corn-based ethanol are required in 2014, and we have plenty of corn to supply this mandate. Last November, the EPA requested that the RFS2 requirement be rolled back to 13 billion gallons; this, after a record production of corn. The farming community would like to see the requirement stay as outlined in RFS2. If we have another large corn crop in 2014, further deterioration of corn prices is expected. This comes at a time when corn prices are hovering around $4 a bushel—half of the $8 per bushel cash corn price that was experienced in the fall of 2012. iBi