August 27, 2002

Senate Agriculture Committee Chairman Tom Harkin (D-IA) has released a USDA report that indicates the farm economy will benefit greatly from the national renewable fuel standard (RFS) established in the Senate energy bill. The study, commissioned by Harkin, shows the RFS will increase farm incomes by $700 million, decrease the trade deficit by $4.45 billion and provide 13,500 new jobs all by 2011.

"Renewable fuels are the wave of the future not only for America's energy independence but for our rural economy as a whole," said Harkin. "The goal of a new national energy policy is to lessen our dependence on foreign oil and improve our own economy by producing more domestically - this study proves the RFS achieves both of these goals."

Harkin asked USDA to study the impact the RFS provision would have on commodity markets, farm income and employment. The analysis found that the provision will lead to increased demand for ethanol and soybean-oil biodiesel and that the legislation likely would generate significant economic benefits to farmers. The study found that corn and sorghum prices would both increase about 13% by 2011. Soybean prices also would increase as much as 13% during the same period.

Because of USDA's predictions that ethanol would replace methyl tertiary butyl ether (MTBE), which has caused groundwater pollution in 16 states the impact on farm incomes between 2002-05 already has been projected. However, between 2006-11, the increased demand for ethanol raises cash receipts for feed grain producers significantly.

"This study proves how important the RFS is and why it is so important that it is included in the final energy bill. In Iowa our corn and soybeans are the oil fields of the future and if President Bush makes the RFS a priority in the energy bill Iowans will reap the rewards," said Harkin.

This spring Harkin, who had introduced legislation to create a nationwide renewable fuels standard, tried to include the bipartisan RFS provision in the energy bill. The energy bill is currently in a joint conference committee where Harkin is hopeful the differences can be worked out so the bill can be sent to the President by the end of the year. Harkin also included more than $400 million in the farm bill for renewable energy, including ethanol and biodiesel.

A copy of the report can be found online at http://harkin.senate.gov/specials/20020826-usda-letter.pdf.