A fuel and your money

“THEY are jealous,” says Terry Branstad, Iowa’s Republican governor, of those who complain that Iowa wields too much influence over national politics, thanks to its hosting of the first presidential caucuses. Every presidential candidate shakes Iowan hands and listens to Iowan concerns. Hillary Clinton came on April 14th, and will be back about ten times before January, predicts Chad Hart at Iowa State University. Mr Branstad plans to use the presidential campaign as an opportunity to promote ethanol. He will urge candidates to support the federal renewable-fuel standard (RFS), which forces oil firms to blend ethanol into vehicle fuel.

Today over 95% of petrol sold in America is blended with 10% ethanol. Iowa is America’s leading producer both of ethanol and of the corn (maize) from which it mostly derives. Nearly half the state’s corn is turned into ethanol. Iowa’s 43 ethanol plants account for nearly 30% of the nation’s production. Around 73,000 jobs in the state depend on the ethanol industry.

Ethanol producers are delighted that Americans are forced to buy their product. But not everyone else is. Oil firms grumble that the mandate hurts their profits. Petrol-refiners complain that it raises their costs. Environmentalists say ethanol is of questionable value for the environment because of the pollution emitted during its production. Carmakers fret that ethanol can corrode petrol tanks that are not adapted to it. People who care about global poverty protest that burning corn in cars raises the price of food for everyone else (though a newer method that involves turning inedible corn stalks into fuel is less harmful).

Mr Branstad is undaunted. He wants Uncle Sam to require even more ethanol in fuel: 30% would be the ideal blend, in his view. Ethanol reduces America’s dependence on foreign oil, he insists, although America is the world’s largest oil- and gas-producer. Moreover, he says, ethanol costs less than regular petrol. “There is so much misinformation on ethanol,” he sighs. “The further you go from the Midwest, the less informed people are.”

Mr Branstad is especially keen to fight for ethanol this year, since midwestern farmers, especially maize-growers, expect much leaner years after a long boom. The Department of Agriculture forecasts that net farm income in America will be down by 32% this year, from $108 billion in 2014 to $73.6 billion (see chart).

Crop farmers face several headwinds. A glut is driving down prices for maize, soyabeans and other crops thanks to record harvests in the past couple of years—and another record harvest expected this year. Another problem is the low price of crude oil, which is making maize-derived ethanol a less attractive alternative source of energy (though it also reduces the cost of operating farming machinery). And lastly, the strong dollar is hurting farmers who export. (Iowans sell a lot of food to China.)

Livestock farmers benefit from lower crop prices, which mean cheaper animal feed. This softens the blow, since many arable farmers also raise cows, pigs or chickens. Still, firms that supply goods to farmers are scared. John Deere, a maker of tractors, has laid off more than 1,000 employees in Iowa since last August. CNH Industrial, another tractor-maker, is also making people redundant.

“Ethanol production saved lots of little towns in the Midwest from dying,” says Richard Longworth, the author of a book on the region in the age of globalisation. Eddyville, a tiny town in south-east Iowa, was probably saved from extinction by a big Cargill plant that has made ethanol there since 1991. The biofuel is often seen as “a last roll of the dice for rural areas where nothing much good has happened for decades”, says Mr Longworth.

Mr Branstad says that Iowans felt betrayed by Barack Obama when his administration proposed relaxing the renewable fuel standard a bit in 2013. (As a senator in Illinois, another big ethanol producer, Mr Obama was a strong supporter of the RFS.) In January the governor launched America’s Renewable Future, a new pro-ethanol campaign group, headed by Eric Branstad, his son. Since a disproportionate number of senators either represent rural states or are planning to run for president, he should have little trouble getting his message across. Mrs Clinton voted several times against the RFS as a senator, but changed her mind when she first ran for president. She is thus welcome in Iowa. Governor Branstad advises her “to come early, and come often”.