UNL study says relaxing RFS during 2012 drought would have cut corn prices

March 10, 2015 |

In Nebraska, by relaxing a federal ethanol mandate, the U.S. Environmental Protection Agency could have counteracted the impact of the 2012 drought on corn prices, a new study by University of Nebraska-Lincoln agricultural economists concludes.

The study provides a guidepost for action by federal policymakers in the event of future drought, said co-author Azzeddine Azzam, a UNL agricultural economist.

He said climatologists for NASA and Cornell University recently predicted that a large portion of the United States could face a megadrought, possibly lasting decades. Meanwhile, the Renewable Fuel Standard mandate for ethanol production is to increase to 36 billion gallons by 2022, nearly double its current levels.

“We’re not telling policymakers whether or not to waive the ethanol mandate,” he said. “But we believe the question of to waive or not waive is going to be asked if such a megadrought occurs. Our research contribution is to provide one method to estimate what portion of the mandate could be waived to offset the effect of drought.”

During the 2012 drought, which affected about 75 percent of the Corn Belt, corn prices shot up 33 percent to an average of $6.89 per bushel. The situation sparked a national debate about the consequences of using corn to make fuel.

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Category: Policy

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