President Donald Trump announced Tuesday he plans to lift a federal ban on summer sales of high-ethanol fuel blends, a move that would likely benefit Texas corn producers but could negatively impact cattle ranchers, according to Texas A&M AgriLife extension economists who follow grain and cattle trends in the state and nationwide.
The plan directs the Environmental Protection Agency (EPA) to initiate the process that would allow E15, or gasoline with 15 percent ethanol, to be sold year-round, possibly as soon as summer 2019. Sale of the higher-ethanol fuel mixture is currently banned between June 1 and Sept. 15 because of ozone-related health and environmental concerns.
"This is a long range, long-term adjustment to ethanol policy and ethanol availability in this country," said Mark Welch, a Texas A&M AgriLife Extension economist who specializes in grain markets. "It is friendly to the biofuel industry and something the industry has wanted for a long time."
Welch said he expected the proposed move to be supportive to the price of corn, but that its impact would not be dramatic in the near term. He said the proposed ethanol policy shift would not be an E15 mandate, and that consumer demand would play a large role in its ultimate impact.
Welch's colleague, fellow AgriLife Extension economist David Anderson, urged a "wait and see" approach to those following the proposal's impacts and progress. "The announcement has been made but nothing has really happened yet," Anderson said.
The E15 proposal must go through formal notice and public comment processes, which the president said he hopes to fast-track to implement the shift by next June.
Numerous oil interest groups denounced the proposal. Last week, a bipartisan group of lawmakers that included U.S. Sen. John Cornyn of Texas sent the president a letter to express "strong opposition" to an expansion of high-ethanol gas sales.
"A one-sided approach to addressing concerns related to the Renewable Fuel Standard (RFS) that favors only one industry stakeholder is misguided," the letter reads in part.
American Petroleum Institute CEO Mike Sommers also expressed his organization's opposition to the proposed policy shift. "Putting a fuel into the marketplace that the vast majority of cars on the road were not designed to use is not in the best interest of consumers," he said in a release Tuesday.
Corn producers, including the Texas Corn Producers Association, praised the decision.
"This is timely support for the state's corn farmers and the greater U.S. economy that relies on a strong agricultural backbone," TCPA President Joe Reed said in a release Wednesday.
Welch said the three-and-a-half-month blackout period challenged some retailers because of the financial costs of changing pumps and warning labels at the start and end of each summer.
The move is likely to raise corn prices, Welch said.
"Using more ethanol means using more corn to make ethanol because we've increased demand," Welch said.
Welch said most corn grown in Texas goes toward livestock feed, and that aside from some ethanol plants in the Texas Panhandle, much of the state does not produce ethanol. Texas produces more than 300 million bushels of corn a year, according to the TCPA, which is significant, though much less than the top-producing Midwestern states of Iowa, Illinois and Nebraska.
Nationally, Welch said, corn used for transportation fuel is the crop's largest use, closely followed by corn for feed use for livestock. Corn used for ethanol production is also used to make a co-product called distillers grains, which is commonly fed to livestock.
"Something to remember is that as a state, we cannot produce all the feed that we use. Texas brings in a substantial amount of grain from other states," Welch said.
A raise in corn prices may negatively impact cattle ranchers in Texas and elsewhere, Anderson said. He said the 2005 Renewable Fuel Standard, which required renewable fuel to be blended into transportation fuel, created a much larger demand for ethanol. The 2007 Energy Independence and Security Act of 2007 expanded and extended its influence, he said.
"The Renewable Fuel Standard was great for corn and soybean farmers and was a disaster for livestock producers," Anderson said. He said it drove corn prices higher to the detriment of the livestock ranchers, and added that the economic shift toward ethanol led to a number of bankruptcies, especially for poultry farmers.
Current corn prices, however, are low, according to Anderson.
"We have a lot of corn right now," he said, and added that expanding ethanol use has been pretty unpopular in the livestock rancher community.
Cheramie Viator, an industry expert and the marketing manager at Westway Feed Products in Tomball, said she hopes beef producers will not suffer long-term collateral damage because of higher feed prices. She said her cattle operation would gravitate toward more molasses-based liquid feed or other co-product based feed for the winter supplements if corn prices rose dramatically as a result of the proposed policy shift.
"Any time there is an increase in corn or any grain price, it will negatively affect ranchers because their annual feed costs and total production costs will increase," Viator said. "Typically, feed and labor costs are two of the highest costs we as beef producers have on an annual basis."
Viator also said that exports and trade are big drivers in cattle prices. Anderson said the U.S. exports about 11 percent of its beef, and that its "big four" export markets are Japan, South Korea, Canada and Mexico.
Mexico is also the biggest buyer of U.S. corn and wheat, Welch said. The U.S., Canada and Mexico came to an agreement Sept. 30 on a revised trade deal, the USMCA, that could replace NAFTA.
Viator, Anderson and Welch each encouraged members of the agriculture industry to follow U.S. trade news because of its impacts on various industry markets.
"I hope that the trade negotiations will enable us to maintain export markets and eventually increase beef demand," Viator said.