Related Businesses Who Were Glad to See the End to Ethanol Subsidies

There are many businesses that were very happy that the ethanol tax subsidy was allowed to expire on January 1st of this year.  Here's an article on what one of the related businesses that were very happy to see this stop:

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.