By Todd Neeley
DTN Staff Reporter
SAN DIEGO (DTN) -- Though there is angst in rural America about the future of the Renewable Fuel Standard and agriculture trade in particular, the leader of the nation's largest ethanol interest group told an ethanol industry audience here Tuesday he's confident President Donald Trump will not abandon agriculture or ethanol at home or abroad.
Renewable Fuels Association President and Chief Executive Officer Bob Dinneen said during his state of the industry speech at the National Ethanol Conference that although times are tough on the farm, things could be worse without a growing ethanol industry.
Though the farm economy continues to be tough for producers who face commodity prices not high enough to account for crop input prices, Dinneen said it was important to keep perspective.
"Still, there is a sense of unease spreading across rural America," he said. "Net-farm income fell to a seven-year low in 2016 and the aggregate value of crops hit its lowest point since 2010. Record corn crops in three of the last four years have pushed stocks to 2.4 billion bushels -- a 30-year high."
Even with a 7% increase in demand, average corn prices are expected to hit a 10-year low this marketing year. USDA recently projected net-farm income to drop to $62 billion in 2017, or about half of the $123 billion that farmers earned in 2013.
"It's probably no consolation to the farmers in the audience," Dinneen said, "but things could be worse. Indeed, they have been worse.
"Imagine what the farm economy would look like without 5.3 billion bushels of demand coming from the ethanol industry. Imagine the state of our rural communities if we didn't have more than 200 ethanol plants providing thousands of jobs, offering investment opportunities, and creating value-added markets for local farmers. It is no exaggeration to say that the recent downturn in the farm economy would have been far worse without the ethanol industry's stabilizing effects," he said.
Dinneen said the Trump administration's approach to trade may benefit ethanol and agriculture.
During the past several years, the ethanol industry has been hit with what Dinneen said have been "unfair and ultimately illegal" trade barriers. Those barriers put up by the European Union, China and others have limited ethanol's ability to build export demand.
Though there is concern in agriculture and ethanol that Trump's rhetoric on trade will be hurtful, Dinneen said he believes the new administration is setting a tone.
"We're all trying to get our grips around the new reality in Washington," Dinneen said. "I believe what Trump is saying now is part of a negotiation. At the end of the day, I have confidence the nation's ability to trade is going to be preserved."
ETHANOL EXPORTS
Last year, the ethanol industry exported 1.05 billion gallons to nearly 60 countries. It was the second-highest export volume on record. Ethanol imports were about 34 million gallons, meaning the net-trade balance for U.S. ethanol was a record 1.01 billion gallons.
The top markets for U.S. ethanol were Brazil (26%), Canada (25%) and China (17%). China was the fastest-growing export market by volume, Dinneen said, importing 106 million more gallons than one year ago. The value of those exports exceeded $2 billion, up 13% from 2015.
The United States also exported 11.5 million metric tons of dried distillers grains with solubles to 51 countries, with China, Mexico and Vietnam accounting for about half of the total.
"But China's implementation of trade-distorting tariffs has significantly slowed those imports from about 1 million metric tons per month in the summer of 2015 to almost nothing today," Dinneen said during the speech.
"China's recent actions have been a major factor driving ethanol and DDGS prices lower in recent months. In fact, DDGS prices are 40% lower than in June 2016. The industry's growing concern over China's anti-U.S. and anti-consumer trade barriers led the RFA, Growth Energy and the U.S. Grains Council to write President Trump a few weeks ago imploring the new administration to put China's recent actions near the top of the administration's China trade agenda."
Although the Trump administration has walked away from the Trans-Pacific Partnership, or TPP, and has indicated it will re-negotiate the North American Free Trade Agreement, or NAFTA, Dinneen said he believes the president also understands trade's importance to rural America.
"There is understandable angst around the president's disdain for multilateral trade pacts," he said.
"Trade is critically important to agriculture and ethanol," Dinneen said. "But Trump, the businessman, most certainly appreciates the importance of trade. His antipathy is toward trade deals he believes have put U.S. companies at a disadvantage, not toward trade itself. Frankly, it will be refreshing to have a leader willing to stand up for American business in trade disputes."
When Trump announces cabinet nominees shortly after the election, the ethanol industry was alarmed by a number of seemingly anti-RFS nominees in Scott Pruitt at the U.S. Environmental Protection Agency and Rick Perry at the U.S. Department of Energy.
Dinneen said that concern should be put to rest.
"When some questioned whether his (Trump) appointment of Scott Pruitt to be EPA administrator or Rick Perry to be DOE secretary signaled a weakening of his resolve on the RFS, their anxiety was relieved throughout the confirmation process when Mr. Pruitt repeatedly affirmed his commitment to uphold the law as Congress had written it," he said.
"Both Pruitt and Perry understand that their perspective has changed, that they will now represent the nation, not the parochial interests of their home states, and each is acutely aware that the boss is solidly in support of American energy, including homegrown, renewable ethanol."
RFS DEBATE SHIFT
Dinneen said the RFS debate on Capitol Hill is shifting away from repealing the law to reforming it after 2022. That is when congressionally mandated volumes are replaced with "largely unfettered discretion by EPA" to set future standards for all renewable fuels.
"We need to be active and constructive participants in that debate," he said. "I don't know about you, but I'm not necessarily comfortable leaving the industry's fate in the hands of what has been an unaccountable bureaucracy that has not always appreciated the importance or benefits of corn ethanol."
Although the EPA took the RFS on a roller-coaster ride during the past eight years with changes to biofuel volumes and fell behind in announcing annual volumes, last year the ethanol industry churned out record production.
Dinneen said the industry is on track for a fifth-consecutive year of record production. At present, ethanol producers are on track to produce 16.1 billion gallons in 2017.
Because of that, he said there is a premium on expanding markets.
"I highlight these statistics not to minimize the demand challenges currently facing our industries, but rather to point out that we are indeed continuing to grow and mature, and that we remain fixated on growing demand," Dinneen said.
"But we have much work to do. We must expand existing markets and open new markets for ethanol here and abroad. We must continue adding value to our plants and pursuing technologies that will make us more efficient and profitable. We've seen how ethanol can lift the ag economy out of the doldrums of massive surpluses, acute supply/demand imbalances, and market prices below the cost of production.
"We've seen how ethanol can transform local markets and invigorate rural economies. It's no coincidence that the most profitable 10-year run in the history of U.S. agriculture began the same year the Renewable Fuel Standard was adopted. We've seen ethanol revitalize agriculture. We know it works. And we will work together to ensure ethanol continues to serve the critical role of stabilizing and strengthening the farm economy."
WASHINGTON POLITICS
Although the Trump administration appears to be in ethanol's camp, Dinneen said D.C. politics will continue to put pressure on the industry.
"While the regulatory agenda moves forward, hopefully with the urgency and efficiency of the blizzard of executive orders marking the first month of the Trump administration, congressional oversight of the RFS and legislative attacks on renewable fuels will continue," he said.
"Our friends in the oil industry continue to target the RFS with ads designed to vilify ethanol even as many oil companies produce ethanol themselves and all of them have recognized ethanol has benefits and is here to stay. We will continue to fight those attacks, and defend both the molecule and the policy with passion and prejudice."
Because the political climate in Washington, D.C., continues to be difficult, Dinneen said corn ethanol's success will depend on the industry's ability to build new partnerships and allies.
"Thankfully, we begin from a position of strength," he said. "Not only do we have a strong base of support throughout the Congress, but we have a resident at 1600 Pennsylvania Ave. who understands the value of ethanol and who is committed to an America-first energy policy."
Todd Neeley can be reached at todd.neeley@dtn.com
Follow him on Twitter @toddneeleyDTN
(AG/SK)
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