"Our cattle rely primarily on Midwestern-grown corn as their primary source for grain. This year, 41% of our nation’s corn crop will be used up by a heavily subsidized ethanol industry. In a year where grain inventories have been reduced by adverse weather conditions, corn prices have risen dramatically. Because of this, any chance of profitability in all protein industries has vanished," says Paul Cameron, a California cattleman.
A member of the National Cattlemen's Beef Association (NCBA), Cameron explained Friday that government support of the corn-based ethanol industry has negatively affected his cattle-feeding operation as well as his ability to retain employees and, ultimately, make a profit.
"The cattle inventory in our own operation is being reduced and we have already begun the process of laying off many of our employees," Cameron says. "Coming from a county with nearly 30% unemployment, these good, hard-working people will be relegated to trying to find jobs where there are none. These are the very people who take pride in the fact that they not only feed a nation, but also feed the world."
That's why Cameron, NCBA and other producers and organizations continue to work with Congress to get some relief from ethanol subsidies.
The latest attempt comes in legislation introduced last week by U.S. Reps. Wally Herger (R-CA) and Joseph Crowley (D-NY) to immediately repeal the 45¢/gal. Volumetric Ethanol Excise Tax Credit (VEETC) as well as the 54¢/gal. tariff on imported ethanol.
"Ethanol subsidies are among the worst examples of special-interest politics in the government," Herger says. "The Government Accountability Office and the Congressional Budget Office have concluded that the ethanol tax credit is both wasteful and duplicative. These subsidies distort the economy by diverting corn away from feedstock, raising costs for farmers and ranchers and, ultimately, for consumers."
Herger is a senior member on the House Committee on Ways and Means, which has jurisdiction over our nation's tax code.
According to Herger, "The Ways and Means Committee has been examining how best to pursue comprehensive tax reform that eliminates special tax breaks and lowers the tax rate for everyone. I believe that abolishing the wasteful ethanol subsidy is a key aspect of moving toward a simpler and fairer tax system."
Other legislation aimed at repealing the VEETC was rejected in the Senate earlier this month, but there appears to be growing bi-partisan support for such a move.
Apparently, the ethanol lobby has resigned itself to at least a partial repeal of the subsidies. In the weekly CME Group's Ethanol Outlook Report a few weeks back, analysts explained, "It has become increasingly clear that the ethanol industry is going to lose at least part of the 45¢/gal. VEETC subsidy for ethanol blenders and the 54¢ tariff on imported ethanol, which both expire at the end of this year. The loss of those measures would obviously be damaging for the industry, but the ethanol industry would at least still have the Renewable Fuels Standard (RFS), which mandates that blenders use certain amounts of ethanol each year. However, the ethanol industry would really be hard hit if it lost both the tax measures and the RFS mandates."
Consequently, the analysts say the ethanol industry is focusing on efforts to protect the RFS.