U.S. Markets closed

American Farm Groups Press Trump for Earlier Ethanol Boost

Mario Parker and Jennifer A. Dlouhy

(Bloomberg) -- American agricultural groups are pushing Donald Trump to swiftly boost quotas for grain-based biofuels amid a growing backlash against the administration in the U.S. corn belt.

The groups want bigger, specific gallon-based commitments from the administration after it granted waivers allowing some oil refiners to sidestep a biofuel blending mandate, according to people familiar with the matter who asked not to be named detailing private conversations.

They are pushing for increased volumes to offset the exemptions granted by the Environmental Protection Agency as well as boosts to accommodate industry growth.

The groups are seeking assurances on this so-called reallocation before the 2020 presidential election. Trump administration officials have already decided to increase 2021 quotas for corn-based ethanol and soybean-derived biodiesel as part of a broad framework for action developed at a Aug. 22 White House meeting. Biofuel advocates say they need that boost sooner, as part of 2020 targets.

“The president says he hears our concerns, but the only thing that really matters is how many gallons of demand will be restored by 2020,” said Brooke Coleman, director of the Advanced Biofuels Business Council. “Oil and their advocates want this to slide to 2021, but that’s not going to help farmers and biofuel producers struggling now.”

Biofuel has become central to a debate that’s pitting two of Trump’s vaunted constituencies -- rural farmers and oil refiners -- against one another. Agricultural interests say that the administration has granted refinery waivers too freely and that has hurt demand for the fuels and the feedstocks used in their production. The EPA and independent oil refiners argue that there’s no tangible impact on demand.

In recent weeks, the White House has held meetings to find ways to quell farmer criticism after the EPA’s Aug. 9 announcement that it granted 31 small refinery exemptions.

Farmer Backlash

The biofuel backlash comes at a time when farmers have borne the brunt of Trump’s trade war with China that’s ensnared U.S. products, including soybeans and ethanol.

On Wednesday, U.S. Agriculture Secretary Sonny Perdue addressed farmers at a town hall in Decatur, Illinois, where he also attended the Farm Progress Show. He told attendees that Trump was planning to make an announcement related to the Renewable Fuel Standard to ease farmer concerns. Corn futures climbed on speculation that an ethanol-boosting plan was forthcoming.

During an on-stage interview with Perdue at the event, Trump called the secretary and addressed the group, reiterating his commitment to the industry, but falling short of announcing any changes to the working plan that’s in place.

Biofuel advocates have been unhappy with the current framework. The White House decided last week that it wouldn’t revoke the just-issued waivers, but agreed to start boosting biofuel-blending quotas to make up for expected exemptions beginning in 2021.

The biodiesel industry is seeking a 387 million gallon boost to 2020 advanced biofuel quotas. It’s also seeking a 330 million gallon increase in a 2021 quota for biomass-based diesel, and an additional 500 million gallons for advanced biofuel in 2020.

Ethanol advocates and farmers want the administration to send an immediate signal to the marketplace to blend more biofuels, said Monte Shaw, head of the Iowa Renewable Fuels Association.

“If the White House rolls out something that we all know won’t help right now, they risk making farmers even angrier than they are now -- and they’re pretty darn angry,” Shaw said by email. Existing proposals only “send a marketplace signal of status quo” and won’t help now, he said.

Trump is planning to visit the Midwest to roll out the final plan in the coming weeks, Perdue said Wednesday. The plan would also include ways to boost demand for higher-ethanol gasoline, known as E15, including changing pump labeling that the ethanol industry says dissuades consumers from filling up with the product.

On Wednesday, the chief executive officers of refiners Valero Energy Corp., Marathon Petroleum Corp. and Flint Hills Resources LP touted their own ethanol production -- buying more than 1 billion bushels of corn annually to produce about a fifth of U.S. supplies -- as they discouraged Trump from boosting biofuel quotas.

It is “simply untrue” that refinery exemptions are harming ethanol demand, they said in a letter to Trump, arguing that instead, the ethanol industry’s woes are tied to “an oversupplied market, the continuing global trade disputes and the historic Midwest flooding” this year.

To contact the reporters on this story: Mario Parker in Chicago at mparker22@bloomberg.net;Jennifer A. Dlouhy in Washington at jdlouhy1@bloomberg.net

To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net, Millie Munshi

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.