Renewable Fuel Standard isn't good for farmers, either

via The Washington Examiner by Tom Elam

In former Sen. Rick Santorum’s recent piece, “Stop the attacks on farmers, homegrown energy,” he claims the Renewable Fuel Standard is an economic saving grace. The Senator says that farmer income is projected to fall this year to the lowest level recorded since 2006, but he ignores the fact that the RFS — which has also been operating for the past 12 years — is a contributor to this decline.

Starting in 2005, the artificial demand created by the RFS biofuel mandate caused corn and soybean prices to temporarily soar. In response to those temporary high prices, and to meet federal government ethanol targets, farmers converted about 16 million acres of wheat, sorghum and other crops to corn and soybean production. Functioning as a corn production mandate, the RFS has radically transformed the agricultural landscape in America — particularly in the Midwest.

The resulting and systemic overproduction is a key reason why our country now suffers from a corn glut. And as basic economics teach, an oversupply typically results in a reduction in prices.

Actual market demand for corn and soy-based biofuels has never matched up to the ambitious mandate levels set by the federal government back in 2007. Still, crop production is linked to mandate volume, and high production levels are continuing to depress commodity prices. Add cheap corn to increasing costs for other operational factors, and it makes sense that farm incomes are taking a hit.

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