Agricultural News
NCBA Commends Senators Who Are Calling for Ethanol Subsidies to be Allowed to Expire
Thu, 02 Dec 2010 4:31:37 CST
The National Cattlemens Beef Association (NCBA) commends the U.S. Senators who sent a letter to U.S. Senate Majority Leader Harry Reid (D-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, 2010. NCBA Executive Director of Legislative Affairs Kristina Butts said that the "commonsense" mentality taken by the Senators who signed the letter 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 U.S. Senators for taking their stand in support of allowing these ethanol subsidies to expire."
According to the U.S. Department of Agriculture, 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 percent of total corn use.
Butts pointed to an August 2009 U.S. Government Accountability Office report 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. According to the report, 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."
The United States Department of Agriculture's (USDA) Economic Research Service released a report 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. Further, a September 2008 Congressional Research Service report stated that 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. The subsidies have had significant negative economic impact on cattle producers," Butts said. "In the coming days as the 111th Congress determines the fate of these subsidies, NCBA encourages all members of Congress to join the Senators who signed the letter and allow the corn-based ethanol subsidies to expire."
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