Ethanol Makers, Farmers Push for Modest Support if Subsidy Dies; Economists Say They’ll Be OK

Business News/Analysis, Federal Legislation, Indiana, Iowa, Kentucky, Opinions, Policy

June 29, 2011

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(AP/Bloomberg/The Washington Post) If a $5 billion-a-year federal subsidy that helped build the ethanol industry comes to an end, it will likely mean two things, experts who have followed its development say.
First, it doesn’t guarantee an end to the high prices that corn farmers have enjoyed and livestock producers and other food manufacturers have endured.
That’s because of the second point: the ethanol industry likely would be fine without the subsidy and keep using just about as much corn as it has the past few years.
As the experts point out, the 45-cent-a-gallon tax credit set to expire at the end of the year doesn’t even go directly to ethanol producers, but instead has been an incentive for oil companies like BP, Valero Energy Corp., and ExxonMobil Corp. — known in the ethanol industry as blenders — to buy ethanol and blend it with gasoline.
And the tax credit isn’t even the primary driver of ethanol demand. That, economists note, has been the federal requirement that the country produce an increasing amount of renewable fuels like ethanol. READ MORE and MORE (Wall Street Journal) and MORE (MyFoxTwinCities) and MORE (Star Tribune) and MORE (Politico) and MORE (Marshall Independent) and MORE (IndyStar) and MORE (Daily News)
Excerpt from Marshall Independent: Lyle Rollag, MCGA regional representative who farms near Beaver Creek, would not speak for the MCGA but agreed to comment strictly as a corn farmer.
“As a farmer I’m not sure how it’s going to shake out,” Rollag said. “The same people that cut ethanol subsidies, extended oil subsidies. As a corn farmer I thought that was a slap in the face.” READ MORE

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