LEGISLATIVE ISSUES

Legislative Issues – Ethanol

Ethanol and Indiana Corn Farmers: A Partnership Worth Preserving

Over a decade ago, the Renewable Fuel Standard (RFS) — one of the most successful energy policies enacted in U.S. history — was implemented, requiring ethanol to be blended into gasoline. This mandate created a surge in Indiana’s ethanol industry, increasing jobs, reducing oil imports and cutting down the state’s greenhouse gas emissions (GHGs). To put it simply, Indiana’s economy and environment became stronger, which significantly supported the growth and success of corn farmers.

As ethanol demand in the U.S. and Indiana continues to swell, thanks in large part to the RFS, crop farmers and the businesses within their supply chain will have great potential to increase their profitability. To secure this economic growth and environmental protection, the RFS must be preserved.

The Development of Indiana Ethanol

Indiana’s corn production accounts for much more than the state’s ethanol resources:

• As of June 2, 2017, Indiana produces 1,173 million gallons of ethanol each year — 7.3 percent of the U.S. ethanol industry’s stock
• Indiana is the fifth largest ethanol-producing state 
• Nearly ⅓ of the state’s crop is converted into ethanol
• As ethanol production increases, so too does the price of corn 

Ethanol and the Indiana’s Economy

In 2014, the Indiana Corn Marketing Council (ICMC) conducted a study to discover the economic impact of ethanol production on the state, measured by Indiana’s gross state product (GSP), household incomes (predominantly rural residents and farmers), permanent employment and local and state taxes. The results showed an array of positive benefits:

• Job creation — Indiana’s ethanol industry produced 526 jobs directly, while an additional 3,620 full-time jobs were created indirectly elsewhere in the state’s economy
• GSP contributions$934 million, not including the economic impact the overall U.S. ethanol industry has had on corn prices, farmers’ income or farmland appreciation
• Increased economic activity — $2,881 million in ethanol, distillers dry grains (DDGS) and corn oil sales, which in turn generates $739 million in additional economic activity across other sectors and households for a combined $3,620 million
• Significant state and local tax contributions — $44 million per year to state and local taxes
• Increased cropland appreciation — Indiana’s cropland prices increased by an average of $52.50 per acre, resulting in an equity increase of $635 million for farmers and rural residents
• Ethanol consumptions and fuel cost savings consumers — Indiana consumed 314 million gallons of ethanol in 2013. Of this, 13.3 million gallons were consumed via 228 retail E85 sales. Lower ethanol prices relative to gasoline at the wholesale level resulted in savings to consumers of $148 million — if price differential passed to retail

Lower cost feed ingredient for livestock — Over 3.2 million tons of DDGS were produced in Indiana at $539.5 million

RFS: Good for Indiana, Good for the U.S.

Indiana’s burgeoning economy would not have seen such significant growth without its ethanol industry — RFS is working.

Compared to gasoline, corn ethanol provides up to a 50 percent reduction in GHGs. Thanks to the 15.3 billion gallons of ethanol produced today, GHGs in the U.S. have been reduced by 43 percent — the equivalent of taking 9.3 million cars off the road for a year.

These numbers, stats and figures matter. They represent the positive change and environmental advancement ethanol production has made for both Indiana and the nation. Continuing this progression means building a stronger, safer economic and environmental atmosphere for future generations.

Legislative Issues – Farm Bill

The 2018 Farm Bill represents an opportunity for Congress to respond to the sharp declines in farm prices by 40 percent and farm income by 46 percent since 2013. While the Average Risk Coverage (ARC), Price Loss Coverage (PLC) and crop insurance programs have provided some protection, it isn’t enough. The resolution of these issues will require more resources than currently available in the Congressional Budget Office baseline.

The years prior to the Agricultural Act of 2014 saw near-record commodity prices and farm income. As a result, agriculture, conservation and nutrition organizations accepted a reduction in the baseline of $23 billion over ten years, including elimination of Direct Payments.

Today, as a result of improvement in the nation’s economy, spending on the Supplemental Nutrition Assistance Program (SNAP) is expected to be down $84 billion over the next decade, and the cost of crop insurance is projected to decline $11 billion from the baseline. These reductions will make addressing funding problems in commodity, conservation, crop insurance, research, energy and export promotion programs even more difficult.

The impact of lower commodity prices is that the safety net protection provided by the 2014 Farm Bill’s Agricultural Risk Coverage is projected to decrease substantially. By fiscal year 2019, the Congressional Budget Office projects Agriculture Risk Coverage, County Option (ARC-CO) assistance for corn, soybeans and wheat to drop by 63 percent, 12 percent, and 7 percent respectively from their 2015 levels. More than 80 percent of the counties with corn, soybeans or wheat base acreage may experience a lower ARC-CO revenue guarantee for the 2018/19 crop year than they are provided this year.

(ARC-CO) uses the product of county average crop yields and national marketing year average prices, i.e. revenue per acre, to determine safety net assistance levels.

Protecting the Future of Farms

The 2018 Farm Bill is based on the clear need for a stronger farm safety net and more resources for other key priorities. Agriculture was the only sector willing to contribute to deficit reduction when the farm economy was healthy. Now, it’s looking to Congress to find resources from outside the farm bill that will help agriculture through this difficult period.

Legislative Issues – Sustaining trade

Exports and international trade are among the top concerns for Indiana corn farmers. In 2013, 117 million bushels of Indiana corn were exported from the state and the nation, proving that strong international markets are of utmost importance to sustain.

In fact, corn and its by products accounted for half of Indiana’s agricultural exports in 2010, totaling $1.7 billion. These exports helped create a ripple of effect of economic triumphs, generating an estimated $1.1 billion and 17,700 jobs throughout the state.

The National Corn Growers Association (NCGA), USDA Trade and International Marketing Resources and the USDA Foreign Ag Service (FAS) work to ensure trade channels remain open, resources and information are readily available and funding, programming, research and education on trade is open to buyers and sellers.