Pioneering study says Renewable Fuel Standard has steadied commodity markets and boosted farmers' income

"In a first-of-its kind study, researchers at Purdue University have illustrated the impact of the Renewable Fuel Standard on the production of biofuels," Madelyn Ostendorf reports for Successful Farming. "The study evaluates the long- and short-term economic impacts of market forces and policies on the biofuels industry, and successfully identified the impact of each market driver."

The federal policy requires transportation fuel to have a minimum (increasing over time) amount of renewable fuels, such as ethanol and biodiesel made from corn and soybeans. RFS and market forces have caused biofuel production and consumption to increase in the U.S. since it was enacted in 2005. "Farzad Taheripour, the agricultural economist who led the study, says RFS played a critical role in reducing uncertainties in commodity markets," Ostendorf reports. "Most significantly, RFS helped farmers use their resources more efficiently."

Taheripour told Ostendorf, "With producing more corn and soybeans, over time farmers were able to bring fallow land back to production, and U.S. annual farm income increased by $8.3 billion between 2004 and 2011, with an additional annual income of $2.3 billion between 2011 and 2016."

The researchers used a complicated computation model that sorts commodities into categories by use (vegetable oils vs. grain meals, for example), and factors in variables such as production rate, consumption rate. "The model takes into account the use of commodity feed stocks for food and fuel, and the competition or trade-offs between those and other market uses," Taheripour told Ostendorf. "It also traces land use and handles intensification in crop production due to technological progress, multicropping, and conversion of unused cropland to crop production. This is the first biofuels study to be able to piece out all these factors individually and to combine that information with short-term models to capture finer and shorter-term impacts."