NCBA applauds Senators wanting to end ethanol subsidies

by Meat&Poultry Staff
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WASHINGTON – US Senators who sent a letter to US Senate Majority Leader Harry Reid (R-Nev.) and Minority Leader Mitch McConnell (R-Ky.) urging them to allow the 30-year-old tax credit and protective tariff for corn-based ethanol to expire as scheduled on Dec. 31 are being applauded by the National Cattlemen’s Beef Association.

Kristina Butts, NCBA executive director of legislative affairs, said the “common sense” mentality taken by the 15 Senators is laudable and that she hoped more senators would follow suit to allow the subsidies to expire.

“The corn-based ethanol industry has been propped up for 30 years with the 45 cent-per-gallon blending credit and the 54 cent-per-gallon import tariff, but the day has come for these subsidies to end,” Butts said. “NCBA supports the development of renewable and alternative fuels. However, as an industry that competes head-to-head with the corn-based ethanol industry for our major input, we feel it’s time to level the playing field for all commodities competing for corn. Allowing the subsidies to expire may require a tough vote for elected officials, but NCBA commends the 15 US Senators for taking their stand in support of allowing these ethanol subsidies to expire.”

Corn use for ethanol production increased from 1.6 billion bushels during the 2005-2006 marketing year to 3.7 billion bushels during the 2008-2009 marketing year, which will account for more than 33% of total corn use, according to the US Department of Agriculture.

Butts referenced an August 2009 US Government Accountability Office study titled “Biofuels – Potential Effects and Challenges of Required Increases in Production and Use” as evidence that the corn-based ethanol industry is mature and that the Volumetric Ethanol Excise Tax Credit (VEETC) should be allowed to expire. The study relays the VEETC’s annual cost to the Treasury in forgone revenues could grow from $4 billion in 2008 to nearly $7 billion in 2015 for conventional corn starch ethanol.”

USDA’s Economic Research Service released a study in 2008 that reported feed costs for livestock, poultry and dairy reached a record high of $45.2 billion – an increase of more than $7 billion over 2007 costs. And a September 2008 Congressional Research Service study stated the dramatic increase in livestock production costs was attributed to feed.

Butts said the cattle-feeding sector has lost $7 billion in equity from December 2007 to February 2010 because of high feed costs and economic factors that have negatively affected beef demand. Between 2005 and 2008, corn prices quadrupled, reaching a record of more than $8 per bushel.

“The blender’s credit and the import tariff give the corn-based ethanol industry a distinct competitive advantage over other end-users of corn,” Butts said. “The subsidies have had significant negative economic impact on cattle producers. In the coming days as the 111th Congress determines the fate of these subsidies, NCBA encourages all members of Congress to join the 15 Senators who signed the letter and allow the corn-based ethanol subsidies to expire.”
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