Unintended consequences of RFS

American farmers will plant 96.5 million acres of corn this year, according to estimates by the U.S. Department of Agriculture. Private industry forecasts suggest acreage could be even higher, depending on planting conditions this spring.

Is all that corn a good thing?

If you’re feeding cattle or hogs this year you’re probably hoping for a bumper crop of corn and lower grain prices, as livestock margins have been miserable for months. And, if you’re like most livestock producers, you probably oppose the federal government’s Renewable Fuel Standard (RFS), which requires transportation fuel sold in the United States to contain a minimum volume of renewable fuels such as corn-based ethanol. A total of 13.2 billion gallons of ethanol was added to American fuels in 2012, and 13.8 billion gallons must be added this year.

Over the last two years nearly 40 percent of the U.S. corn crop has been used to make ethanol, and the increased demand has helped drive corn prices higher. From an economic standpoint for rural America, higher corn values have provided benefits. An increase in farm income and the trickle-down effect for rural communities have been welcome.

Additionally, Midwest farmland values have reached record levels. The Federal Reserve Bank in Chicago says farmland values increased 16 percent during 2012, the third-largest gain in the last 35 years. And that increase was seen during one of the worst droughts in recorded history. In Iowa, the average price of farmland in 2012 was $8,296 per acre, a 23.7 percent jump from just the previous year.

But the list of those opposing the RFS is lengthening, and at least one group argues we should look beyond the immediate economic impacts of corn and focus on the environmental impact.

The Environmental Working Group (EWG), a 20-year-old environmental-health research and advocacy organization, claims America’s RFS is creating unintended consequences for our environment. For instance, research from South Dakota State University, using satellite imagery, found that from 2006 to 2011 U.S. farmers converted more than 1.3 million acres from grassland to corn and soybean production. National acreage data shows the dramatic increase as plantings in 2005 totaled 82 million acres but jumped to more than 96 million acres in 2012.

“The loss of this grassland is having adverse impacts on water quality, soil health and wildlife habitat in a region that includes Iowa, Minnesota and North and South Dakota,” says Alex Rindler, policy associate for EWG.

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