How Poultry Farms Can Beat Profit-Draining Renewable Fuel Standard Regulations
The Renewable Fuel Standard program was originally an attempt from the Environmental Protection Agency (EPA) to help the U.S. achieve energy independence from foreign oil, and to improve air quality. But it has morphed into a major profit-inhibiting government regulation for agricultural producers like poultry farmers.
The good news for poultry farmers is, there’s an easy way to defray those costs and achieve energy independence at the same time.
If your feed costs have been rising and you aren’t sure why, what you’re about to read might be the cloud-parting answer you’ve been seeking.
What is the Renewable Fuel Standard (RFS)?
The RFS program requires certain percentages of renewable fuels to be set aside and used to replace the amount of fossil fuels used in jet fuel, home heating oil, and transportation fuel. The EPA created the renewable fuel standard program as part of the Energy Policy Act of 2005, in an effort to increase energy security, reduce oil imports, and combat climate change.
4 renewable fuel standard program categories
The EPA set four categories that count as fossil fuel replacements. RFS requirements state that each renewable fuel category must reduce lifecycle greenhouse gas emissions by a specific minimum volume, expressed in percentages:
- Biomass-based renewable diesel (50%) — any biodiesel fuel, usually from food-based sources like corn
- Advanced biofuel (50%) — fuel from non-food-based feedstocks that don’t impact food supply
- Total renewable fuel (20%) — usually means ethanol derived from cornstarch
- Cellulosic biofuel (60%) — refers to forestry and agricultural waste like paper pulp, sawdust, straw, grass
The effect on corn and feedstock
The RFS program has had a direct impact on the price of animal feed, in particular, corn.
The renewable fuel standard requires certain quantities of corn to be designated for use in ethanol production, with increasing amounts over time. Like many government actions, the motives for the renewable fuel standard started out good — liberate the U.S. from dependence on foreign oil by producing more of our own fuel.
And since ethanol is a major component of gasoline and ethanol can be derived from corn, this seemed like a smart idea. While the RFS program has been in effect since the mid-2000s, converting corn to ethanol has been around much longer.
But what started out as a means to energy freedom has turned into another loss of freedom for farmers.
How does the RFS hurt poultry farmers?
Corn is one of the primary feeds used by poultry farmers, as well as most other forms of livestock. With more and more corn now being set aside for biofuel, the price of corn feed has worsened due to an ever-tightening supply coupled with increased demand for chicken worldwide.
And because so much corn has to be planted to remain in compliance with the biofuel mandates, fewer soybeans have been planted, causing those costs to rise as well. Plus, more land gets used to grow biofuels, which means less land remains to grow corn and other feedstocks.
The result? Vastly higher costs for feed. This has had two major consequences.
- Exports of feed are down, hurting profits from that sector
- Poultry farmers and other farms who buy corn and soybean feed have faced rising prices
Why can’t farmers just pass on costs to consumers?
Will consumers spend a little more for chicken? This graph from a FarmEcon report suggests that strategy won’t work:
The green line shows consumer spending on poultry, in dollars. The blue line shows poultry consumption, in pounds. Note that the lines grew at very similar rates for decades. Then, the lines began diverging sharply in 2006 when the RFS took effect.
What does that mean in layman’s terms? It means people are spending the same amount of money on poultry, but eating less of it. Less consumption means lower profits. And that’s why some poultry farmers have had to close their poultry houses or sell out to bigger corporations who can manage the increased costs a bit easier.
See How much would you save?
How to use solar energy to ‘Punch back’ against the RFS program
A typical poultry house costs thousands of dollars per year to operate. This includes electricity, supplies, equipment, repairs, cleanouts after each flock (usually 5 or 6 per year), and other costs.
But electricity is typically the highest of these variable costs. One Maryland farm featured in a May 2010 report that’s no longer on the university website spent over $13,000 on electricity per year for a two-house poultry farm. These costs are fairly typical, but will be higher today since that report was from 2010.
What if a poultry farmer spending $15,000 per year on energy could reduce that to $5000?
If you could save $10,000 per year on energy, you’d save $100,000 in ten years, and $200,000 in twenty.
How much corn feed can you buy, even at the regulation-bumped prices due to the RFS, for that amount of money?
Cutting your energy costs by $10,000 (usually much more) is very possible with solar energy, which is more affordable than you might think. Poultry houses are especially suitable for this because of their long flat roofs and traditional wide open spaces. Lots of sunlight, no obstructions, easy to install.
How to cut solar installation costs by over 50%
Anyone installing solar panels can save 30% through the federal Investment Tax Credit (ITC). But many farms can save even more through the USDA REAP, a program specifically created to help farmers reduce energy costs.
You may not like government programs, even ones that are intended to help. After all, the renewable fuel standard was supposed to help, and look how that turned out.
But when it comes to solar, here’s how you can look at this:
A government regulation is killing your profitability by raising the cost of feed. But with the REAP grant and the ITC, you can use another government program to cut your energy costs and attain energy independence.
Later, if the RFS eventually gets amended or removed (which is possible because of increasing anger about its economic effects and questionable environmental benefits), then you’ll get the double bonus of finally seeing lower feed costs along with the slashed energy expenses made possible by your solar array.
Explore solar power for your poultry houses
When it comes to poultry farms, solar energy is a win-win. And instead of getting frustrated about regulations like the renewable fuel standard that you can’t do anything about at the moment, solar power gives you a way to cut your expenses now and own your power, saving you six figures (or much more for large farms) over the long term operation of your farm.
See this poultry farm solar case study to see how much one farmer is saving on energy.
Ready to talk solar with a poultry farm solar specialist?
Land on the wrong “greenhouse” post? Learn about how to reduce greenhouse energy costs here.
