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President Trump, why did you betray ethanol?

June 3, 2019
By David Kruse - Columnist , Farm News

I got this letter as an equity-holder from Little Sioux Corn Processors ethanol company:

"Dear Owner,

For the first time in 20 years - 20 years!!! - in 2018 ethanol use in the U.S. went down. And it went down as a direct result of small refinery exemptions from the RFS granted by former EPA Administrator Scott Pruitt.

Who got these "small" refinery exemptions? Companies like ExxonMobil and Chevron. Our champions are fighting back as hard as they can. Ethanol needs these unjustified exemptions reigned in and year-round E15 finalized by June 1st. We need to support our champions in Iowa and in Congress as they fight to restore a strong RFS and grow demand for ethanol. To do that, we need your support for LSCP PAC today."

The first line is dead on about the result and cause of the reduction in annual ethanol use. Petroleum companies have to blend an allotted amount of ethanol or buy a RIN in order to comply with the Renewable Fuels Standard (RFS). RIN waivers allow petroleum companies to opt out of the RFS. They also lower the cost of RINs to petroleum interests allowing them to comply with the RFS without blending ethanol. LSCP, like most others, tie the waivers to Scott Pruitt. He worked for DJT and if you have been paying attention, not much happens in his administration by subordinates that he doesn't want to happen. He will immediately correct them, even embarrassing them in the process, if he disagrees with what they are doing. That didn't happen with Pruitt. Trump thought that Pruitt was doing a great job. They act like Pruitt snuck the RIN waivers by President Trump. He didn't. Trump appointed Andrew Wheeler to replace Pruitt who also approved RIN waivers. Grassley/Ernst voted to confirm both Pruitt and Wheeler. Pruitt is long gone so what point is there now to citing him as the problem?

These are 'Trump RIN waivers.' No one really disputes that so why is everyone so afraid of saying so? Fear of Trump is why. They are afraid that if they call him out specifically that he will respond by blocking E-15 again. Who cares? If RINs are plentiful and cheap enough, so that refiners who are now blending ethanol will buy RINs and stop blending, what difference does it make what blend is out there? The reason that USDA has revised the ethanol corn crush down four times is that the RIN waivers are undermining ethanol demand. E-15 will not change that much. Retailers will blend just the ethanol they have to and we could actually see the blend rate decline. They put poison pills in the E-15 rules so that RINs would get cheaper. They will likely approve E-15 use for this summer but I would not be surprised to see the ethanol corn crush shrink further. The RIN waivers trump E-15.

So, who exactly are our champions in Iowa and Congress for the RFS and ethanol that LSCP are referring to? Grassley/Ernst got lied to by Pruitt, skunked by Ted Cruz and they still voted to confirm Wheeler. The Branstad's sold out the industry and farmers on the idea that Trump was a strong ethanol supporter. Not true. They have zero credibility left.

The Iowa Renewable Fuels Association gave Trump a forum at their Summit where he stood up and lied to members how strongly he supported the RFS. I saw it...I was there. Governor Reynolds is pretty quiet over the betrayal of the RFS by Trump. They still won't put the words 'Trump RIN waivers' together. They blame Pruitt to cover for Trump. That makes it look like they put party first - being conflicted as better Republicans than they are ethanol advocates. What champion are they talking about in this letter? Steve King supported Cruz.

What I would like to see happen is this: The IA RFA should take out a full page add in the DesMoines Register and Sioux City Journal with the headline, "President Trump. . . Why Did You Betray Ethanol?" I would like to see that backed up by a joint press conference with Grassley, Ernst, Reynolds, Rastetter, Shaw, Naig, the ICGA and any of our Congressional delegation including state legislators show up in solidarity that they were calling him out on his betrayal of RIN waivers and demand destruction of the RFS. I would consider making a financial contribution to that event but anything else is a waste of money. The RFS was the hill to die on and as I see it, these so-called "champions" surrendered it.

Farm groups who are in Washington, like the American Soybean Association, Corn Growers, and AFBF are telling the administration how much their policies are damaging the Ag sector. The problem is that the administration doesn't care. It has bigger fish to fry, and are aligned with the Petroleum industry over the RFS. Killing us with the trade war is enough for them to send checks to farmers making believe that fixes it. One would think that they are working for Brazilian farmers to make their ag great. They are expanding their corn ethanol plants in Brazil while shrinking ethanol production here in the US.

So, while U.S. commodity and ag groups do complain to the administration, they do so relatively quietly and they never criticize the president directly despite him being the driver of these damaging policies.

The U.S. ag commodity and farm groups mentioned fear of blow-back from their ideological members so they fear challenging Trump directly, and instead beat around the bush (something I rarely do). They are, therefore, handicapped by the politics and are not very effective. Until their members are damaged so severely by Trump ag policies that they let their farm groups actually fight for them by challenging Trump directly, nothing will change.

David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet.

 
 

 

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