Dairies
hail end of ethanol subsidies
Dairy
groups hope tax credit, tariff expiration will lead to lower corn prices
By CAROL
RYAN DUMAS
Capital
Press
Dairy
groups are among those claiming victory in the elimination of the ethanol
blenders tax credit and tariffs on imported ethanol, which expired Dec. 31
without renewal by Congress.
The
fuel industry had received a 45-cent per gallon tax credit to blend ethanol
with gasoline, and were protected from foreign competition by a 54-cent per
gallon tariff on imported ethanol.
That
policy drove up the price of feed to livestock producers, said Bob Naerebout,
executive director of Idaho Dairymen's Association. Most ethanol is made from
corn.
"High
feed cost has made it extremely difficult for dairy producers to break
even," he said.
Livestock
producers have made no bones about blaming those high costs on the subsidized
ethanol industry and have taken their concerns to Congress.
California
Milk Producers Council is excited about the expiration of the tax and trade
subsidies, said Rob Vandenheuvel, the council's manager.
"While
the direct impact on corn prices is unknown at this point, it's a great step
forward," he said
But
Scott Brown, ag economist with the Food and Agricultural Policy Research
Institute, University of Missouri, expects the impact to be small because world
demand for grain is high, and the Renewable Fuel Standard, which mandates
increasing amounts of ethanol and other alternative fuels be used, is still in
place.
Brown's
analysis found that the blenders credit only added 2 cents per bushel to the
price of corn. The tariff on imported ethanol added 11 cents, and the Renewable
Fuel Standard added 18 cents.
The
effects of all the policies working together amounted to 53 cents a bushel, he
said.
Analyses
by the Congressional Budget Office and Iowa State University's Center for
Agricultural and Rural Development are in the same ballpark, with the CBO
showing an effect of 50 to 80 cents per bushel and CARD showing 59 cents per
bushel.
Corn
prices jumped from about $2.25 a bushel in 2001-02 to more than $6 today. But
many factors have contributed to the increase, he said, including strong
international demand for corn and soybeans, and for meat and dairy products.
"Yes,
we've tripled corn prices, but you can't attribute all associated (price
increases) to ethanol," he said.
The
ethanol mandates in the Renewable Fuel Standard remain an issue.
"Expiration
of these subsidies and tariffs would have a much bigger impact if the RFS were
not still in place," said Michael Marsh, executive director of Western
United Dairymen's Association.
If the
RFS went away, there would be a huge reduction in the cost of feed, he said.
That's a fight livestock groups and others will continue.
"We're
tickled we got part of the job done," he said.
