Higher ethanol blends would help U.S. growers facing a 'modern-day farm crisis'
Roger Zylstra harvest soybeans on his farm near Kellogg, Iowa, in 2017, working into the night to catch up after a wet week. Rodney White and Michael Zamora/The Register
The CEO of a large national ethanol company says moving to higher blends of the renewable fuel could help farmers facing another possible farm crisis.
Jeff Broin, CEO of South Dakota's Poet, said expanding U.S. access to gasoline with 15 percent ethanol would reduce the U.S. surplus of corn and boost commodity prices.
Most gasoline sold in the United States is 10 percent ethanol, under a federal mandate that requires blending biofuels into the nation's fuel supply.
But shifting to gasoline with 15 percent ethanol would generate demand for 2 billion bushels of corn annually, Broin said.
The country would use about 7 billion more gallons of ethanol.
"That would help ag get back on its feet," he told about 100 people attending an Iowa Biotechnology Association luncheon in Ankeny this week.
"It would bring down the worldwide surplus and stabilize prices, not for just the American farmer, but for the worldwide farmer, including third-world farmers," he said.
Farmers are struggling to escape a lingering downturn.
U.S. farm income is expected to fall to $59.5 billion this year, about 50 percent below a 2013 high.
"Unfortunately, Midwest farmers are entering a modern-day ag crisis," Broin said.
He was a teenager in Minnesota when the 1980s farm crisis hit. Broin recalled neighbors losing their land and machinery sold for pennies on the dollar.
Corn and soybean prices, he said, were 30 to 40 percent below the cost to grow them.
"It was a bleak time for agriculture and the Midwest," Broin said.
"What rural America faces today bears a striking resemblance to the situation facing us in those earlier years," said the 52-year-old.
Broin said JPMorgan projects 10 percent of Midwest farms "will go out of business within a year."
"Farm loans and debts are rising, even as farmers have fewer means to pay off their obligations," he said.
"People are literally betting the farm during a time when prospects for future success are grim."
Broin was among a group of renewable fuel and oil industry leaders who met with President Donald Trump and congressional and administration leaders earlier this month.
Oil leaders are fighting for relief from the federal Renewable Fuel Standard, after a Pennsylvania refinery filed for bankruptcy and blamed the cost of ethanol compliance credits for its financial troubles.
To prove compliance with the federal renewable fuels program, refiners must buy credits called RINs, either by earning them through blending or by buying them.
With rising biofuels quotas, the prices for the credits have climbed.
Some oil-state senators want to cap the credits, a move ethanol supporters say would devastate the ethanol and farm economy.
Instead, Iowa and other Midwestern state and federal leaders want to expand use of gasoline with 15 percent ethanol.
It would increase the number of compliance credits available, reducing their costs, they say.
Broin said he believes a compromise is possible.
Trump, he said, is "trying to help refiners with a problem they have, but he also wants to make sure that rural America sees a win out of this as well."
An expanded ethanol markets also is needed to make room for cellulosic ethanol, renewable fuel that Poet is making from corn cobs, husks and stalks in northwest Iowa.
The ethanol industry has struggled to produce the next-generation biofuel that's more environmentally friendly than corn-based ethanol.
Poet is in arbitration to settle $33 million in damage claims against Andritz Inc., an Austrian engineering firm it hired to design the system needed to convert biomass into cellulosic ethanol at its Emmetsburg plant.
Broin said the Sioux Falls company figured out itself how to break down crop residue, one of the first steps in production.
Broin said the Emmetsburg plant is ramping up production and shipping cellulosic ethanol. He declined to say when the plant would reach full production.