Earlier this week, we learned one of the top producers of biofuels in Iowa is scaling back production of ethanol. Here’s what it means — already low corn prices will sink even more, and some Iowans are going to lose their job.
POET Energy, which operates seven biofuels plants in Iowa, said they are scaling back ethanol production because of the huge increase in the small refinery exemptions (SRE) approved by the US Environmental Protection Agency (EPA). SRE’s allow oil refineries to forgo ethanol blending requirements. They are closing one ethanol plant completely (in Indiana), but said the largest drops in production will occur here in Iowa. Overall, they are reducing corn processing by 100 million bushels. For reference, with today’s market price, that’s $363 million less dollars going to our farm families.
Unfortunately, the news is just the latest in a string of troubling events for rural Iowa caused by on-going trade wars and new tariffs.
After nearly two years of disputes, China announced on Aug. 3 they are banning all agricultural imports from the United States. That came after a 50% drop in U.S. ag exports to China from 2017 to 2018.
Last month, another ethanol plant in northwest Iowa, Plymouth Energy, shut down due to low demand for ethanol.
In May, John Deere announced they are scaling back production by 20% due to low demand. That means fewer jobs for Iowans in communities around Waterloo, Dubuque, Ottumwa, and the Quad-Cities. Deere specifically cited the ongoing trade disputes as part of the problem.
The continued losses in the ethanol industry are devastating to not only farmers, but rural communities, jobs and small businesses.
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According to the Iowa Renewable Fuels Association, biofuels account for more than $5 billion of Iowa’s economy and generate $2.5 billion of income for Iowa households. There are more than 48,000 Iowans with jobs tied to renewable energy.
While margins for the ethanol industry have always been thin, ongoing trade wars have made the ethanol industry unsustainable. According to information from the Federal Reserve, farm bankruptcies have been on the rise over the last year, almost double from the previous low in 2014.
Instead of opening markets and raising demand for crops and biofuels, the only action so far to improve the dire situation our ag economy and rural communities face today have been federal bailouts.
While the infusion of cash directly to farmers will mitigate some losses they face this year, we desperately need a permanent, long-term plan that grows trade and opens new markets for our crops.
Here’s what I know about my friends and neighbors in rural Iowa: They don’t appreciate being political pawns, and they are not looking for freebies, just free markets to sell their products.
While the trade wars will continue to be a drag on our rural economy, it isn’t too late for the EPA to at least redistribute or reallocate the lost volume of ethanol to mitigate the losses in Iowa. The EPA should also guarantee that there will be no additional SRE’s granted in the next two years.
Now is the time for action to protect farmers, jobs, rural communities and Iowa’s economy.