Unless the EPA changes the way it considers small refinery waiver requests to the Renewable Fuel Standard, the ethanol industry could continue to suffer major market losses in the years to come, according to the University of Missouri’s Food and Agriculture Policy Research Institute’s recently published update to its March 2018 U.S. baseline outlook for agricultural and biofuel markets. Economists at FAPRI, conclude the industry could lose about 4.6 billion gallons of domestic demand and almost $20 billion in lost sales revenue in the next six years, if the agency continues to grant waivers at its current rate.
Click this link to view the FAPRI baseline:
According to its own numbers detailed in the latest renewable volume obligations proposal, the EPA granted a total of 49 waivers for 2016 and 2017. The EPA said in its latest RFS volumes proposal that it waived a total of 2.25 billion gallons in those years. New EPA Acting Administrator Andrew Wheeler has indicated the agency will continue to consider future waiver requests in the same manner.
Comparing the March 2018 outlook to the updated outlook reveals a number of effects from the small refinery waivers through 2023.
First, the de facto RFS requirement for corn ethanol falls from the statutory level of 15 billion gallons to just 13.7 billion gallons.
U.S. ethanol consumption drops by an average of 761 million gallons annually between 2018 and 2023, or a total of 4.6 billion gallons during the six-year period. That is the equivalent of 1.64 billion bushels (bb) of corn demand lost, or nearly 300 million bushels (mb) per year, according to FAPRI’s numbers.
Though the gasoline market currently allows E10, or 10% ethanol and 90% gasoline, that rate falls below 10% in 2019 and slides to 9.5% by 2023.
FAPRI’s March 2018 outlook, however, projected the national average blend rate above 10% every year, rising steadily to 10.4% by 2023.
Source: Todd Neeley, DTN
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