Industry Groups Want End to Ethanol Subsidies, Protective Tariff

The United States’ largest livestock and poultry trade associations have requested the Senate leadership to let a 30-year-old tax credit and a protective tariff for ethanol to expire as scheduled at the end of the year. The request came in a letter signed by the American Meat Institute, the National Turkey Federation, the National Chicken Council, the National Cattlemen’s Beef Association, the National Pork Producer’s Council and the National Meat Association.

“Although we support the need to advance renewable and alternative sources of energy, we strongly believe it is time that the mature corn-based ethanol industry operate on a level playing field with other commodities that rely on corn as their major input,” the letter said. “Favoring one segment of agriculture at the expense of another does not benefit agriculture as a whole or the consumers that ultimately purchase our products.”

The Senate Finance Committee is currently mulling whether to extend the ethanol blender’s credit and the tariff on imported ethanol. Both are set to expire at the close of 2010.

The letter expressed the groups’ worries about the adverse economic effects on animal agriculture that they feel government backing of corn ethanol has had, particularly the Volumetric Ethanol Excise Tax Credit (VEETC) and the import tariff on foreign ethanol. “The blender’s tax credit, coupled with the import tariff on foreign ethanol, has distorted the corn market, increased the cost of feeding animals, and squeezed production margins, resulting in job losses and bankruptcies in rural communities across America,” the groups point out in their letter.

The groups also cited a September 2008 report by the Congressional Research Service (CRS) finding that the dramatic increase in livestock production costs were due to higher feed costs. Between 2005 and 2008, corn prices quadrupled, hitting a record high of over $8 a bushel and creating an unsustainable pattern for the meat and poultry industries, the groups noted, adding that animal agriculture has subsequently suffered severe economic hardship.

Although identifying themselves as being in favor of energy independence and the development of the renewable fuels industry, the groups said in their letter that “30 years of support has created a mature corn ethanol industry that now needs to compete fairly in the marketplace and allow for the next generation of renewable fuels to grow.”