MONMOUTH, Ill. - Rob Elliott has been growing corn on his Warren County, Ill., farmland since the late 1970s, but has rarely been as concerned as he is now over the future of the Illinois corn market and the value of his land. 1981, the year farmland values began a precipitous slide due, in part, to the Federal Reserve’s tighter monetary policy following a bout of inflation and a compromised banking sector, immediately comes to his mind. 

Now, Elliott and others are warning of a new, perhaps more ominous threat to Midwestern crop farms coming in the form of Environmental Protection Agency (EPA) emission mandates and the government’s rapid push for electric vehicles (EVs). On April 12, the EPA released a strict emissions proposal for cars, sport-utility vehicles, and pickups manufactured from 2027 to 2032. The goal of the proposal was to encourage more EV production and sales, while effectively weaning the nation from fuel-dependent vehicles. If the proposal is adopted, corn and soybean producers, like Elliott, would in turn see a large share of the market for their corn and soybeans vanish.

In addition, the National Highway Transportation Safety Administration (NHTSA) in late July released a proposal that would require an industry fleet-wide average of 58 miles per gallon for cars and light duty trucks by model year 2032. The standard was written to align with EPA’s April emissions proposal, completing the Biden administration’s de facto EV mandate. 

“I think there are two pieces to this. I’m not against EVs, but the strategic nature of the push behind it is a little ill-conceived without all the details coming into play,” said Elliott. “The second piece is what effect this will have on the economy in general. It will have a huge ripple effect, and what I anticipate could happen if we make this massive shift to EVs and the market for ethanol goes away, the effects of reducing corn prices would be pretty dramatic.” 

According to a recent study by the Institute of Agriculture and Natural Resources at the University of Nebraska-Lincoln (UN-L), the average annual per bushel price of corn has roughly doubled since the ethanol mandates were implemented in 2005 via the Renewable Fuel Standard (RFS). “While it is unlikely that all of this increase can be attributed to ethanol, there is little doubt that it has had a significant positive effect on the price of corn. Given current production technology and cash rental rates in Iowa and Nebraska, a quick analysis suggests that as much as 32 percent of farmland value could be lost if the price of corn fell to half what it averaged in 2022,” reads the study, “Could the EPA Cause the Next Farm Financial Crisis?,” in part.

This number should look familiar as it is approximate to the decline in farmland value experienced during the farm financial crisis in the 1980s, the study’s authors noted. 

Around 23 percent of all corn grown in Illinois went to the production of ethanol in 2022, according to the Illinois Corn Marketing Board. On the production side, there are currently 13 ethanol plants in Illinois, with annual production of 1.4 billion gallons and an annual production capacity of 1.7 billion gallons.

In Iowa, where the most corn is grown for ethanol, about 57 percent of the corn harvested in 2022 was processed at ethanol plants. In order of corn for ethanol production by state, Iowa is trailed by Nebraska, where 32 percent of the corn crop went for ethanol in 2022, Illinois, South Dakota, where two of every three rows of corn is grown for ethanol, and Indiana, where around 450 million bushels of corn are used for ethanol every year, rounding out the top five. 

“(1981) was not a fun time, and there are a lot of mirrors there as to what we could maybe go through with this EPA proposal. In the mid-70s commodity prices went up, and we’ve had prices go up (via the RFS) in current times. (President) Jimmy Carter’s grain embargo and government action put a damper on commodity prices, and at the same time we had record high inflation and record high interest rates. At the same time the economy began to lag, a lot of farmers saw their land prices go up and couldn’t pay their debts as the rural economy tanked,” said Elliott.

“Considering this, the government action that we see now with the EV push and the EPA and NHTSA mandates is not very well thought-through when it comes to the broader ramifications to the general economy,” he added.  

The UN-L study, issued by the university’s Department of Agricultural Economics, agrees with Elliott’s assessment of the potential for deep financial and societal ramifications within and outside the Midwest farming industry if the proposals are enacted. 

“While the primary unintended consequence of more EV production and sales may be a dramatic decline in the value of farmland in the Midwest, such a decline in the price of corn would have profound implications for the financial viability of Midwestern farming operations and the nation’s food supply. In addition, rural businesses that rely on a viable agricultural sector would be negatively impacted, as would rural schools, because property taxes are the primary source of school funding,” noted the study’s authors, UN-L Professor Jeffrey Stokes and agricultural economist Jim Jansen. 

In addition, the study found that rural community banks and lenders, whose fortunes are often tied to their local agricultural economies, could face profound implications from the loss of crop production and land values the mandates could induce.

“Lots of bad things could begin to happen. I think the most problematic thing about this,” said Elliott, “is that you’ve got agencies in the government that are carrying out the agenda of a certain group out there, and it’s not really Congress that’s taking the action in making law across the board. That’s maybe the most troubling part of it.”

In response to the EV mandates, Elliott feels that corn and soybean growers should join him in urging their elected lawmakers to support the Next Generation Fuels Act (NGFA), which requires automakers to manufacture and certify vehicles that use only high-octane fuels, such as ethanol, for emission and fuel economy standards beginning with model years 2028 and 2033.  

“(The NGFA) would level the playing field to this EV push, would change the equation and bring reality to this. It would allow ethanol to get a fair shake, which it isn’t today, and it would allow automakers to make an optimized, greener engine. It would also serve to not shut anybody out of the equation, while keeping rural economies growing,” said Elliott, who has served on and off for around 20 years as a board member and officer of the Illinois Corn Growers Board, and five years as a board member and officer of the National Corn Growers Association. 

The UN-L study concludes with a plea to the EPA to slow down and carefully consider all of the potential consequences of its proposal. “Any serious analysis that results in a recommendation to remove ethanol from the nation’s energy strategy, either directly or indirectly, must include a full accounting of not just the intended consequences but the unintended ones as well. The potential negative impacts of the EPA’s proposal on the financial viability of a significant portion of the agricultural sector, community banks, the Farm Credit System, and the businesses, schools, and ultimately people making up rural communities are too substantial and important to ignore,” according to the UN-L study.