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DAVID KRUSE

By Staff | Aug 29, 2014

Sometimes when I ask a question, I get an answer. The question that I asked was why CENEX would be no better than petroleum companies in expanding the marketing of higher ethanol blends through its extensive system of retail stations?

Ironically, CENEX has a picture of a blenders pump on its webpage for renewables fuel, but doesn’t consider E-15 or higher blends of ethanol to be a “gasoline” in their system.

CENEX is as much a part of the ethanol blend wall as many other major oil companies.

A subscriber sent me the answer to the question that I posed as to why CENEX was not leading and opening market access to consumers.

The response was, “Unfortunately CHS-CENEX is not any better than any other refiner for wanting to protect its market share.

“If you consider their refineries have a production capacity of 140,000 barrels per day of gasoline (that would be about 5.88 million gallons daily) and the lone ethanol plant that they own has an annual production capacity of 130 million gallons, they don’t even have enough capacity to produce all the ethanol to blend their own gasoline production.

“So their incentive to promote higher blends would only force them to buy ethanol for blending (which shouldn’t be an issue since they have marketing agreements with several other plants.)

“The kicker is the blender pump that www.chsinc.com/energy-and-industrial/renewable-fuels has on their page for renewable fuels.”

The summary was that CENEX is literally acting the part of a petroleum company rather than a farmer-owned cooperative in its fuel distribution.

Their mission is to make farmers money and advancing market access to consumers for higher ethanol blends would be consistent with that mission.

Stations that have installed blender’s pumps typically report higher fuel sales.

Farmers provide the feedstock for ethanol rather than oil companies. It should become part of the CENEX business plan to install blender pumps in every CENEX station by a realistic date.

CENEX can play a key role in tearing down the blend wall and why wouldn’t it?

Subscribers have responded to the blend wall. Referring to CENEX, one wrote, “Sadly they may need to see customers punishing them for not offering higher blends, maybe a ‘gorilla (sic) marketing strategy’ of getting a couple of gallons of E-85 to put in the tank before filling up with 12 gallons of standard blend – the net would be like a E-20 blend – but only for those with flex fuel vehicles.

“Maybe use a fuel can filled with E-85 from a different producer. Does Valero sell branded ethanol cans?”

A Missouri subscriber outlined how he gets around the blend wall.

“For the past 10 years I have been blending at the pump in all my gas vehicles. E85 is generally 51 percent ethanol here, so I usually put 6 to 8 gallons of it with twice as much E10.

“This gets me about an E30 if my math is correct. I posted at Newagtalk.com about this and was surprised to see others have been doing the same thing.

My local MFA has E-85 so that is an alternative for Missourians as many MFA’s do carry E85. I’m not sure about the other states availability to do this, but it could be substantial.

“I’ve done this in my 2001 Chevrolet for a long time without any problems.”

Farmers can do their own blending. While most farmers understand how critical ethanol demand is to their corn market, there are still some who appear stuck in denial living in the zip code of cluelessville over use of ethanol.

The owner of an Iowa oil company with a tank wagon service lamented how many farm customers still don’t fill the home barrel with E-10.

He said that not even the higher-priced gasoline converted them all. They can be a stubborn lot, wrong or right.

This time they are stubbornly wrong. What that means is that they would rather have an ARC or PLC taxpayer subsidy than use ethanol.

I would make farmers who don’t use higher ethanol blends ineligible for farm subsidy payments. The Iowa oil company said that they want to deliver E-15 through its tank wagon service, but has been frustrated over finding a source for the product.

State government should be helping fuel retailers with this. The larger petroleum companies and pipeline distributers won’t blend E-15 so he can’t buy it to sell it.

I think many farmers now putting E-10 in the barrel would fill the barrel with E-15 if they could.

The blend wall is not going to come down with some big swing of a wrecking ball. It is going to come down with hammers and drills chipping away at it, with farmers swinging and drilling.

If a farmer won’t do that, how can he ask taxpayers for a subsidy? Ethanol is not subsidized.

Opening market access for ethanol is a free market exercise that reduces farm subsidies. The farm sector has to do its part before asking something of others. CENEX is a part of that, not doing all that it should be doing.

Oil companies had their Congressional representatives go to a lot of trouble to take out cost-sharing and incentives for retail stations to install blender’s pumps from the farm bill.

It shows how deep they have invested in the political infrastructure in Washington to maintain the blend wall.

The ethanol industry and corn producer’s organizations need to do what they can to work with fuel retailers so that “not installing” a blender’s pump makes no economic sense to them.

David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet.

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