On the campaign trail, Donald Trump made two big promises: renegotiating free trade agreements and helping corn growers by supporting ethanol.
He has followed through on the first, withdrawing the U.S. from the Trans-Pacific Partnership, attempting to renegotiate the North American Free Trade Agreement and demanding China curb trade practices widely viewed as unfair.
But as it turns out, that’s only increased pressure on him to follow through on the second, which he’s waffled on.
As tensions over trade have proven painful to Midwestern farmers in the short term, demands that he do more to back ethanol have increased from farmers hoping it might offset the losses elsewhere.
Farmers in places of key political importance like Iowa, Missouri and Michigan are increasingly anxious about the falling price of corn and soybeans that have followed China’s response to Trump’s trade moves.
For many farmers, Trump appears to have sided with the oil industry, which they believe exerts undue influence on ethanol policy. It’s an argument that Trump himself once used when campaigning against Texas Sen. Ted Cruz in the GOP primary.
“He will destroy your ethanol business 100%,” Trump told voters ahead of the Iowa caucuses in 2016. “And look, I’m not really blaming him because he’s financed by oil people. The oil people don’t want ethanol, it’s very simple.”
Now, with the midterm elections fast approaching, Midwestern farmers say it’s time for Trump to help them out of their rut by changing the Administration’s tune. If not, they argue that oil refiners could essentially kill the Renewable Fuel Standard, a government regulation that props up ethanol. “If they’re successful,” says Richard Oswald, a corn and soybean farmer in Langdon, Missouri, “then we’ll see a farm depression.”
The importance of ethanol is easy to see here in Iowa and nearby states. Outside of the cities, you can drive for hours on end surrounded by corn crops. At the reception desk of POET’s Corning, Iowa ethanol plant, a blue baseball cap asks to “Make the RFS Great Again” in the same style as the president’s red Make America Great Again caps. The Renewable Fuel Standard, may not be a top-tier political issue for political constituencies across the country, but it’s a key concern for grain farmers and the communities built around them.
“Where we are right now, anything that reduces demand, whether its demand for ethanol, demand for soybeans is negative,” says Jim Sutter CEO of the U.S. Soybean Export Council. “It’s not good for agriculture.”
The local support for ethanol is a question of simple economics: nearly 40% of all corn produced in the U.S. winds up being refined into ethanol, a reality supported by the decade old RFS. But the Trump Administration has undercut that policy by granting waivers to a slew of oil companies, exempting them from the requirement. That maneuver has slashed ethanol demand by more than 2 billion barrels, which has in turn hurt demand for corn and contributed to the falling price of the product.
The Administration’s stance on the issue has dismayed farmers, particularly because Trump positioned himself as an ethanol supporter on the campaign trail. Before the Iowa caucuses, Trump promised to support the RFS, and went as far as to say that he would support increasing the quantity of ethanol required in gasoline, which helped bring several key GOP endorsements ahead of the Iowa caucuses. His position contrasted sharply with those of several of his Republican opponents, who argued that the policy picks winners and losers.
Congress first created RFS to reduce the country’s dependence on foreign oil and address climate change-causing carbon dioxide emissions. Since then, a legitimate debate has emerged on both of those points: ethanol may not reduce emissions as much as hoped when the entire lifecycle is considered and an abundance of American oil has put the country on track to be a net energy exporter in the coming years.
“Despite its early promise, the RFS has been a well-intentioned flop,” said Congressman Peter Welch, a Vermont Democrat, when he introduced reform legislation earlier this year.
But the Trump Administration isn’t weakening RFS on either of those points. Instead, the Administration has granted at least 29 of what amount to economic hardship waivers to refineries last year. The waiver policy was intended to help small refiners, but the administration has interpreted the rule loosely.
The midterms give corn farmers and the ethanol industry some leverage to push Trump to keep his promises. Democrats in competitive congressional races in states like Iowa and Missouri have seized on the devastation Trump’s trade agenda has brought farmers and tied their opponents to the president’s policies. A change in direction from the administration on ethanol could help mitigate the damage and signal to farmers that Trump remains on their side even while he girds for a long-haul trade fight with China and others.
“They make promises and you hold them to their promises,” says Greg Olsen, general manager of POET’s Corning facility. “And that’s going to determine whether or not people are going to support them.”
In that vein, the Administration has suggested that it may provide some relief by allowing the sale of gasoline made with up to 15% ethanol, known as E15, year round. Currently, the EPA prohibits the sale of E15 during the summer, arguing that it could contribute to smog. Agriculture Secretary Sonny Perdue told a gathering of Iowa farmers in late August that the administration was close to making an announcement to allow for year-round E15. “We’ll have an announcement sooner rather than later,” he said, according to a report in the Cedar Rapids Gazette.
But this isn’t the first time Trump has floated the idea of helping out ethanol producers to mitigate the damage of his trade agenda, and the timeline of such a move remains unclear as patience wears thin. “He said were going to hear some news soon, so we’re hoping to hear some news soon,” says Olsen.
And while the solution may seem obvious like an obvious political move, Trump faces powerful interests on the other side of the equation, namely the oil and gas companies that the RFS requires mix fuel. Many refiners — think the Koch Brothers and Trump supporter Carl Icahn — carry outsize influence in Republican politics and have fought proposed changes tooth and nail. On top of that, many Republicans in Congress want to see the rule reformed not bolstered.
Farmers see the struggle between the two interests groups plainly, and view the administration’s hesitation to follow through as a clear bowing down to oil interests. Trump’s ability — or inability — to satisfy both will have clear political implications as he tries to continue raising money from the likes of Icahn and leans on the support of farmers in the midterms and beyond.
Perhaps more importantly, his ability to address the issue has consequences for the farmers who have spent years planting corn simply because the government told them ethanol refiners would buy it.