Year-round sales of gasoline mixed with 15% ethanol OK’d
President Donald Trump’s move to boost corn-based ethanol was billed as a win for his rural base. That goodwill is being undermined by his threats to slap tariffs on Mexico, a top buyer of U.S. agricultural products.
On Friday, the administration followed through on a plan announced last October in Iowa, ahead of U.S. mid-term elections, that would allow year-round sales of E15 gasoline, a brew comprised of 15% ethanol, higher than the benchmark 10% widely sold. It was a measure championed by corn farmers.
But late Thursday, Trump tweeted that he would impose tariffs on all Mexican goods over illegal immigration – risking retaliation targeting U.S. agricultural exports to the country.
The dueling announcements put Trump’s agricultural constituents in an awkward spot – praising and criticizing the president at the same time. Mexico is the biggest buyer of U.S. corn and American-made dried distillers grains, a byproduct of corn-based ethanol production that’s fed to livestock.
In recent months, out of concern that the E15 rule could be delayed, agricultural groups appealed to the administration to finalize the higher blends to give farmers some relief from low prices, a trade war with China and incessant rains.
Trump had made expanding E15 access a central part of his bid to woo Midwest voters before the 2020 election. But concern over his new Mexico tariff plan is depriving him of political mileage from unleashing higher-ethanol gasoline.
“A modest uptick in ethanol demand from year-round E15 pales in comparison to risks posed to the farming sector from escalating trade tensions with Mexico,” said Josh Price, an analyst with Height Capital Markets.
Within hours on Friday morning, the National Corn Growers Association issued statements related to administration’s actions. It thanked Trump and lauded the year-round E15 move, saying “farmers are facing some tough times which makes this announcement particularly welcome.”
The association then issued another statement, saying it “strongly urges the President to rethink applying new tariffs to Mexico goods,” adding that with “a perfect storm of challenges in farm country, we cannot afford the uncertainty this action would bring.”
Hours before the formal E15 announcement, two of Trump’s most ardent supporters in Iowa – Republican senators Chuck Grassley and Joni Ernst – were focusing on the tariffs and not the ethanol breakthrough.
On Thursday night, Grassley blasted the president’s Mexico plan as a “misuse of presidential tariff authority” that runs “counter to congressional intent.” Then on Friday, he praised Trump for keeping his promise on E15: “It will be a boon to the rural economy in Iowa, especially considering continued trade uncertainty.”
Monte Shaw, president of the Iowa Renewable Fuels Association, said that while he’s happy with the rule, “corn growers are probably having a much more mixed-emotion day” and “they’re probably feeling a split personality,” alternating between cheering the potential for higher domestic sales and worry about being dragged into another trade spat.
“Politically, agriculture views E15 as a big win,” Scott Irwin, an agricultural economist at the University of Illinois in Urbana-Champaign, said. “My view is that it’s more of an” appearance victory. “The Mexican thing is potentially a big deal because it’s such a big market for corn. We’re messing politically with another important buyer.”