Amending RFS Ethanol Mandate - Spill-Over Effects on Corn Derivative Industry
The substantial impact on corn derivatives in the last few years coincided with rampant increase in ethanol production in USA mandated by RFS. In 2012-13, 40% of U.S total production of corn was used to make ethanol for blending with gasoline, up from 14% in 2005. Massive increase in corn allocation towards ethanol had restricted its usage in manufacturing derivatives. To everyone's surprise, during Jan 2014, EPA has proposed to cut down corn ethanol usage in 2014 from the statutory levels set during 2007 when RFS was formulated. It claims corn ethanol has reached its "blend wall of 10%" and any increase in production has to be accommodated via increasing the % of bio ethanol to 85% (from E10 to E85) where, large percentage of vehicle fleet is not compatible. API protests that corn ethanol to be revoked in RFS owing to increased costs at pump whereas RFS and agriculturist group are defending with lowest per unit cost supported by increase in acreage and production. Will consumption of corn in ethanol industry dampen drastically? How prices and end use industries consuming corn derivatives will react? What could be stand of EPA?
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