This summer Growth Energy came out with a bold proposal to phase out the blenders tax credit and instead invest government money to help ethanol compete with oil. The proposal caught the rest of the ethanol industry leading groups by surprise, and showed a division among the leading groups.
Last week it appeared that the top ethanol groups - Growth Energy, Renewable Fuels Association, National Corn Growers Association and the American Coalition for Ethanol - were working on a policy blueprint moving forward with the Obama Administration and those on Capitol Hill to address long-term needs for building out ethanol use.
The blender's credit expires at the end of 2010 and the ethanol industry is scrambling to get something passed in the lame duck session when Congress returns in November after the elections.
The blueprint lays out a suite of extended tax credits, loan guarantees and infrastructure investments. Meanwhile, livestock producers, environmental groups and taxpayer interest groups say now is the time to end taxpayer support for the 30-year old ethanol industry, especially as corn prices are on the rise.
Reports out last week indicated the plan is in the proposal stage with key Obama officials involved, including new White House chief of staff Pete Rouse. Rouse, former chief of staff for South Dakota Majority Leader Tom Daschle, is well versed regarding ethanol.
The plan includes an extension of the 45-cents blenders credit "at the highest level possible" for the next year. Growth Energy previously had called for the end to the tax credit, although the other major groups have been outspoken in support of at least a one-year extension to evaluate the best approach moving forward. Some on Capitol Hill have floated a 9-cent cut in the tax credit. The tax credit, now given to gasoline blenders, would be transitioned to a new four-year refundable domestic producers' tax credit given directly to ethanol producers.
The plan also gives a higher producer credit for ethanol producers who can prove a major reduction in the carbon footprint. The Renewable Fuels Standard (RFS2) calls for advanced biofuels, and limits corn-based ethanol at 15 billion gallons. The proposal would allow corn-starch ethanol to quality as an "advanced biofuel" if certain improvements were made in cutting emissions.
Infrastructure developments call for more rapid deployment of flex-fuel vehicles and pumps. It would also provide loan guarantees for ethanol pipelines. The proposal also strikes the indirect land use change restrictions written in RFS2.
This Thursday Agriculture Secretary Tom Vilsack will discuss the progress USDA and other federal agencies are making toward achieving the 36 billion gallon biofuel production goal mandated by the Renewable Fuels Standard and new efforts by the Obama administration to bolster the industry and reduce U.S. dependence on foreign oil.
A statement from Vilsack's office noted that "other topics of the address will include ensuring that infrastructure is in place to ease the production and use of domestically produced renewable transportation fuel, as well as the administration's strategy to foster renewable energy nationwide," all points similar to items of Growth Energy's Fueling Freedom plan.
Those who are not in favor of the added support to the ethanol industry again voiced opposition for the proposed new taxpayer dollars devoted to the industry. Patrick Boyle, president of the American Meat Institute, said the ethanol tax credit must be allowed to expire, not be expanded.
Corn prices hit a two-year high last week. Boyle said higher corn prices will have an impact on meat prices. National Chicken Council president George Watts said the rising corn feed costs have caused a 6% increase in the retail price of fresh whole broiler chickens from 2008 to 2010. Watts stated, "Channeling even more corn into ethanol will, in time, only drive up the cost of chicken even more."
From December 2007 to February 2010, the cattle-feeding sector of the beef industry lost a record $7 billion in equity partly because of high feed costs and the weak economy, said the National Cattlemen’s Beef Association.
Conservative food price estimates call for increases of 1-2% next year. Outside analysts are calling for increases in the 4-5% range. Bill Lapp, analyst for Advanced Economic Solutions, noted that higher food prices won't hit until 2011. Most livestock outfits have hedging programs in place to help alleviate the increasing feed prices. Ultimately it will be the first or second quarter of next year when today's high prices get figured in, Lapp said.
Scott Faber of the Grocery Manufacturers Assn, said that it is hard to imagine that the Congress and the Administration would invest in a mature ethanol industry that has already been given $40 billion in subsidies "at a time when we can't increase modestly to feed more children healthier lunches."
Policy is one of the most important issues facing farmers today, but often the most difficult to digest. Jacqui Fatka has a passion to decode the often difficult world of agricultural policy into terms understandable for today's ag players.
Fatka joined the Farm Progress team as E-Content Editor in August 2003 after graduating from Iowa State University. Prior to full-time employment with Farm Progress, she interned at Wallaces Farmer magazine, Iowa Sen. Chuck Grassley's press office and the Iowa Pork Producers Association and freelanced for National Hog Farmer. She also worked as a public relations consultant with Iowa Industries for the Future, an effort to bring together major players in the biorenewables industry.
Currently Fatka is a staff editor at a sister publication, Feedstuffs. For Farm Futures she regularly tells the story of ongoing agricultural policy changes. Her byline can also be found on management profiles.
Fatka grew up on a grain and livestock farm near Atlantic, Iowa. She currently lives in central Ohio with her husband Eric, and their three children - Josiah, Spencer and Avonell.
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