The waiver that the Environmental Protection Agency (EPA) granted, allowing up to 15% ethanol inclusion in gasoline (up from 10%) for vehicles manufactured in 2007 or after,

October 26, 2010

4 Min Read
Decision Has No Impact – For Now

The waiver that the Environmental Protection Agency (EPA) granted, allowing up to 15% ethanol inclusion in gasoline (up from 10%) for vehicles manufactured in 2007 or after, is being criticized by ethanol supporters and opponents alike.

“We’re disappointed in the very limited scope of this approval, but pleased EPA has finally taken action to partially approve the waiver request to allow higher blends of ethanol in some motor vehicles,” says Bart Schott, National Corn Growers Association (NCGA) president and a Kulm, ND, grower. “We believe this bifurcation of the approval process, and the labels that are expected to be placed on higher-blend fuel pumps, can lead to general consumer confusion and therefore act counter to the original intent.”

By proceeding along this path, Schott says EPA’s decision casts an unnecessary shadow on all ethanol-blend levels.

Opponents of tying ethanol prices to feed costs have nothing to cheer about, although the decision had no impact on corn prices and likely won’t, at least for a while.

The waiver allowing a higher percentage of E15 is not a requirement. Given all of the headaches and confusion involved, plenty of analysts doubt that blenders will rush to produce E15.

“…For now, the market impacts of the higher blend limit are likely to be negligible due mainly to the narrow scope of the decision,” say John Michael Riley, Mississippi State University ag economist, and John D. Anderson, American Farm Bureau Federation livestock economist. In last week’s In the Cattle Markets newsletter, they explain, “Retailers cannot feasibly move to carrying E15 exclusively since it is only approved for 2007 and newer vehicles. Few are likely to devote storage and pump capacity to segregating E10 and E15 blends. Even with both E15 and E10 available, drivers of approved vehicles would still be able to use all gasoline grades. As a result, some level of confusion is sure to arise which will further diminish the higher limit's impact. Until the higher blend limit is made to apply to a much broader class of consumers, demand for E15 will be limited...”

Likewise, according to last week’s CME Group Ethanol Outlook Report:

“…The EPA's decision will not result in any significant increase in ethanol demand until at least the second half of 2011. There are still serious issues to address such as whether legislation is needed to enforce auto warranties when an owner uses E15. In addition, most retailers are not likely to sell E15 because they are concerned about misuse by consumers, liability, whether their pumps are UL-approved for E15, and the likely cost for installing new pumps. Progress on selling E85 has been glacial and E15 is likely to face the same hurdles. Still, the EPA has started down the road of allowing more ethanol to be used in 2007+ vehicles that represent one-third of U.S. fuel consumption, which at least opens the door towards an eventual increase in U.S. ethanol consumption.”

For the week ending Oct. 17, according to the National Agricultural Statistics Service:
Corn – 68% of the crop is in the bin, which is 52% or 36 days ahead of last year; 29% ahead of average. Ten of the 18 major estimating states were 20 points or more ahead of both last year and the five-year average.

Soybeans – Harvest is 83% complete, 54% or 26 days ahead of last year and 21% more than average. Dry weather and excellent harvest conditions had pushed progress in Illinois, Indiana, Iowa, Minnesota and Nebraska, the five largest soybean-producing states, to 35 points or more ahead of last year and 20 points or more ahead of normal.

Winter wheat – 80% is planted, the 9% ahead of last year and 3% ahead the five-year average. Seeding was most ahead of last year and normal in the Middle Mississippi and Ohio Valley. 51% has emerged, 2% ahead of last year and 1% behind the five-year average. While warm, sunny weather provided nearly ideal conditions for winter wheat seeding, unfavorably dry conditions left portions of the Central and Southern Plains in need of rain for adequate crop establishment.

Sorghum – 94% is at or beyond the mature stage, 23% ahead of last year and 15% ahead of the five-year average. Most notably, crop maturity in Kansas and Texas, the two largest sorghum-producing states, was 23 points or more ahead of last year and 11 points or more ahead of normal. 62% has been harvested, 27% ahead of last year and 14% ahead of the five-year average.

Pasture – 40% of the nation’s pasture and range is rated as Good or Excellent, 10% less than last year. 28% is rated Poor or Very Poor, 8% more than a year ago.

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