It seems Indiana’s farmers are facing too much rain, or drought; or it’s too hot too early, or too cold to soon, or there’s the late spring freeze or the early fall freeze. It’s either feast or famine in farming, and we’ve developed tools and techniques for coping with it.
But there’s another issue facing the state’s farmers that has received very little attention: stagnant commodity prices. According to the National Agricultural Statistical Service (NASS), if you look at the fifty years preceding 2005, you will see that prices for Indiana’s largest commodity, corn, remained relatively flat, stuck at an average less than $2 per bushel, all while all of the inputs required to raise the crop – the price of fuel, equipment, land, property taxes, herbicide, labor and seed, just to name a few – continued to rise.
Things in rural America took a dramatic turn for the good in 2005 when Congress – in an attempt to wean our great nation of its dependence on foreign oil – passed the Renewable Fuel Standard (RFS). The RFS mandated that 36 billion gallons of ethanol be blended into the U.S. gasoline supply by 2022. And thankfully for America’s heartland, much of that ethanol comes from corn. The RFS has been a shot in the arm for rural America, ringing in a period of prosperity and increasingly fair prices for commodities that frankly, hadn’t been seen in generations. The RFS created, in essence, a new domestic market for corn, and prices reacted accordingly. Looking at the period from 2008 to 2012, corn prices more than doubled from their pitiful historic average, reaching roughly $5 per bushel.
All told, the RFS is projected to add more than $1.7 trillion to our Gross Domestic Product between 2008 and 2022, according to the Environmental Protection Agency (EPA). That is, if the EPA issues the RFS volume targets as set forth by Congress. Until then, investors and farmers are holding their breath hoping that the RFS gets back on track.