Iowa Ag Review


The Renewable Fuels Standard (RFS) mandates that the nation’s fuel supply contain at least 11.1 billion gallons of biofuels in 2009 and 12.9 billion gallons in 2010. Of these volumes, biodiesel must make up at least 500 million gallons in 2009 and 650 million gallons in 2010. Other “advanced” biofuels must make up 100 million gallons in 2009 and 200 million gallons in 2010. If the volumes of biodiesel and other advanced biofuels are exactly met, then the RFS mandates consumption of 10.5 and 12.0 billion gallons of conventional biofuels, the most important of which is domestic corn ethanol and Brazilian ethanol that is not used to meet the other advanced biofuels mandate. The corn and soybean lobbies, together with the biofuels industry, worked hard to get these mandates passed. The biofuels industry wanted guarantees that they would have a market for their product. Corn and soybean farmers wanted to lock in increased demand for their crops. An examination of the linkages between the RFS, energy prices, and crop prices shows how the RFS works in the interest of corn and soybean farmers by creating a floor under their commodity prices.