SD farmers fear uncertain ethanol future


Editor’s note: This is an AP Member Exchange feature shared by the Sioux Falls Argus Leader.

 

SIOUX FALLS (AP) – When he learned about the first ethanol pump opening up in Milbank, Orrie Swayze hopped off his tractor, drove his 1974 Ford to the station and filled its tank with fuel made mostly from corn.

"It ran as good or better on straight E85," Swayze said.

Swayze, now 73 and retired, has been an advocate ever since for corn-based fuel. Ethanol came to the rescue of growers like Swayze, injecting a new value into crops, driving prices higher and boosting the state's economy. Much of the industry's expansion since the 1990s depended on federal policies, including new rules to ensure clean air, fuel economy and a marketplace for renewable fuels.

But like many of his peers in corn and ethanol, the next four years leave Swayze with questions.

A Donald Trump White House means a new, uncertain political landscape. Some of the Trump administration's leaders have deep ties to the oil industry. The seismic political transition raises questions and concerns for the benefactors of a multi-billion dollar industry that also happens to drive South Dakota's economy.

Ethanol was far from a major talking point for Trump on the campaign trail. Even after touring a Poet plant in Iowa, he uttered just a few sentences about renewable fuel and its impact on Midwestern jobs.

"I went out to see some of the folks on the ethanol," Trump said at the 2015 rally in Fort Dodge. "And good stuff and great people. Put a lot of people to work out here too, I want to tell you. I just want to tell you that."

The president never mentioned ethanol on Twitter. He has since expressed support for upholding the renewable fuel standards. But people on his team have allegiances elsewhere. Some have been outspoken critics of ethanol and federal biofuel regulations.

Appointments of naysayers doesn't necessarily mean dark days ahead for ethanol policy, which is also shaped by Congress, said Jon Schaff, a political scientist at Northern State University in Aberdeen.

It just means the next four years will be less than predictable.

"It's always difficult to make a definitive statements about, 'this is what the Trump administration thinks,'" Schaff told the Argus Leader. "There seems to be a lack of discipline."

It didn't take long for new players in seats of power to raise the hackles of corn growers and the ethanol industry.

Early signs of turbulence have since died down thanks to assurances from Trump that he supports federal biofuel standards as written, but those in the industry are making trips between South Dakota and Washington, D.C., just to make sure they're heard.

Corn-based fuel depends on regulations such as the Congress-approved renewable fuel standards, which have historically driven demand and lifted commodity prices.

South Dakota's economy depends on its corn crop. The corn crop depends on ethanol production, which depends on federal mandates.

It's a confusing reliance on federal regulations for a red state. But as much as most South Dakotans sniff at the idea of big government, the state's economy rises and falls with the listed value of a bushel.

That value has been plummeting in recent years. Steady decreases have resonated across the state and in Sioux Falls as sales tax revenues fell short of expectations.

Ethanol producers and corn growers look to federal policymakers for answers. As Scott VanderWal, president of the right-leaning South Dakota Farm Bureau said, mandates supporting ethanol are fair because of the petroleum industry's reluctance to accept biofuels.

"You have to take into account that the oil industry is subsidized," VanderWal said. "Until that would go away, then it's probably appropriate to keep doing things the way we have been."

Ethanol plays a major role in the state's economy in its own right. There are 15 ethanol plants in South Dakota, each employing dozens people. Plants in the state produce more than one billion gallons of ethanol and 2.4 million metric tons of byproduct, according to South Dakota State University.

The American Coalition for Ethanol, based in Sioux Falls, represents more than 500 members, including growers, producers and other industry stakeholders. Like some of its members, the group bases faith in the White House on comments made by the president during his campaign.

It's the same faith rural voters placed in the president when they voted for him last November, said Brian Jennings, executive vice president of the nonprofit.

"Rural America is credited with helping lift him to victory," Jennings said. "One of the key issues in rural America in terms of the economy is demand for crops to make biofuels."

The coalition encouraged members to be politically active during the White House transition. Others in the state have joined in the activity since January, including South Dakota farmers, advocacy groups and ethanol producers. Leaders from the state's biggest ethanol producer visited the White House last month.

"We met with several of President Trump's key people," said Jeff Broin, founder and CEO at Poet. "Poet is always involved in the politics surrounding biofuels, as are our competitors in the oil industry."

South Dakota's congressional delegation is also protective of the industry driving the state's economy.

U.S. Sen. John Thune said he asked Trump's environmental and agricultural appointees whether they were committed to the federal government's renewable fuel standards, which, among other rules, mandate a minimum usage each year for ethanol. Both assured him and others they would uphold the rules as written.

"We will be holding them to that," Thune said. "We'll be paying close attention."

The head of the state's biggest ethanol producer said his industry has a history of helping to drive demand in times when prices are low and there is more corn than demand.

The history of the U.S. agriculture industry is dotted with periods of high supply and low land values.

Ethanol has long been an answer to flagging grain prices, going back to the emergence of the industry in the late 1980s.

"Ethanol was really born at a time when ag commodities were in major oversupply in this country," Broin said. "We entered the industry literally at the bottom of the land value era."

Ethanol created new demand for corn. The number of bushels going to livestock feed or for international trade has remained mostly flat, while demand for ethanol and ethanol byproducts such as feed supplements grew after the first few years after the current renewable fuel standards were passed, but flattened out in 2010. The easing of demand, along with increased activity from corn growers, led to what Broin calls an "ag crisis."

Keith Alverson, a 37-year-old farmer in Chester, said ethanol is vital to growers. He grows corn and soybeans on about 2,500 acres.

"That is the most important thing that we've seen in South Dakota as far as a driver of our state's ag economy," Alverson said.


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