Waiting on an announcement!
As I wrote about in the last newsletter, the corn and ethanol industries seem to have “grabbed back” the attention of the administration again. We seemed to have Pennsylvania Avenue’s attention for a good part of the summer: year-round E15, large rally at an ethanol plant that Dennis McNinch and Greg Krissek attended and the delay of small refinery exemptions (SREs). However, that abruptly changed a few weeks back when 31 waivers were granted. It appears that the administration vastly underestimated the reaction that granting SREs would bring forth in the heartland. The SRE announcement closely coincided with further Chinese tariffs, which added insult to injury.
As a sign that the attention has shifted back to the Midwest , recent tweets and conversations give us reason to believe that some sort of ethanol package is set to be announced in the coming week. Three main pieces believed to be on the table.
- 500-million-gallon increase in ethanol volumes as part of the Renewable Fuel Standard (RFS) for 2020.
- Enhanced fueling infrastructure program like the Biofuels Infrastructure Program (BIP) that Kansas Corn and other state partners received two years ago.
- Incorporate the gallons waived by the 31 SREs into the 2020 or 2021 volumes.
Any of these would provide some relief to the industry, but all three of them have different impacts. Strengthening the RFS to give corn ethanol a larger volume and offset the SREs provides some shorter-term relief. However, points 1 and 3 would be temporary with arguably no long-term demand impacts beyond 2021 and cold put us in the same boat we are in post 2021.
An enhanced fueling program similar to BIP could increase long-term demand, but does not provide short-term relief. However, upgraded fuel infrastructure that supports higher blends has a long usable life, ensuring the infrastructure needed to sell higher blends is available for many years to come. Additionally, we see from our own Kansas Corn station grants that once consumers are accustomed to higher ethanol blends the demand increases, with some of the most successful stations achieving 5% monthly (60% annually) year-over-year growth for ethanol sales. It is difficult to promote higher blends to the customers if they do not have a place to purchase them!
Regardless of additional federal funding available, please remember that Kansas Corn has and continues to fund blender pumps and conversions across the state with checkoff dollars and our staff are in contact with potential stations daily.
We will know in the next week or so if the Midwest has the attention of the Administration by what the ethanol package contains. Secretary Perdue and members of congress from across the Midwest, including our own Kansas delegation, especially Congressman Marshall serve as strong allies for us on this issue. It is refreshing to know they are working strongly on our behalf.