AMI Urges Senate Leaders to Allow Ethanol Tax Credit and Protective Tariff to ExpireFriday, July 16, 2010
(American Meat Institute)
AMI, joined by national industry trade associations including the National Turkey Federation, the National Chicken Council, National Cattlemen’s Beef Association, the National Pork Producer’s Council and the National Meat Association is urging the Senate Leadership to allow a 30-year-old tax credit and a protective tariff for ethanol to expire at the end of this year.
“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 operates on a level playing field with other commodities that rely on corn as their major input. 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 groups wrote in a letter to Senators Harry Reid of Nevada and Mitch McConnell of Kentucky, Majority and Minority Leaders, respectively.
The letter notes serious concerns over the negative economic effects that government support for corn-ethanol has had on animal agriculture, specifically 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 letter reads.
The letter notes that a September 2008 report by the Congressional Research Service (CRS) stated that the dramatic increase in livestock production costs were attributed to higher costs for feed. “There is no safety net to protect against the volatility in the commodity markets, forcing all industries to pay higher prices for input costs due to the fluctuations in the corn market,” the letter states.
The letter points to significant hardships suffered by the agriculture industry:
- The turkey industry has endured the deepest
cutbacks of any in animal agriculture – a
decrease in turkeys raised of more than 6
percent since 2007 levels and a near 9 percent
reduction from 2008 levels – to adjust to
these increased input costs. More
importantly, the turkey industry eliminated
nearly 3,000 jobs vital to rural America in
2008 and 2009 alone.
- The U.S. pork industry endured the two most
challenging years in the industry’s history
in 2008 and 2009. Total losses for the
industry amounted to more than $6.2 billion and
average farrow-to-finish operations lost nearly
$23 for each animal marketed from October 2007
through January 2010. This financial
disaster occurred despite near-record hog
prices in 2008. The cause of the losses
was higher production costs driven primarily by
higher corn and soybean prices. Even now,
projected production costs for 2010 are 25
percent higher than the costs that prevailed
from 2000 through 2006.
- The cattle feeding sector of the beef
industry lost a record $7 billion in equity
from December 2007 to February 2010 due to high
feed costs and economic factors that have
negatively affected beef demand.
- The broiler industry has experienced cumulative additional cost since corn prices began their rise in the fall of 2006 of nearly $15 billion, as of April 2010. This additional cost does not include the higher cost of other feed ingredients, such as soybean meal, whose prices tend to move in tandem with corn. Accordingly, broiler companies have suffered reduced profitability.
The letter also noted the Congressional Budget Office (CBO) report released this week titled “Using Biofuel Tax Credits to Achieve Energy and Environmental Policy Goals.” The report found that after adjustments for the different energy contents of the various biofuels and the petroleum fuel used to produce them, producers of ethanol made from corn or other similar feedstocks receive 73 cents to provide an amount of biofuel with the energy equivalent to that in one gallon of gasoline. The report also stated that the cost to taxpayers of using ethanol to reduce gasoline consumption by one gallon was $1.78.
The letter ends by reminding the committee that animal agriculture is united in its support for energy independence and the development of the renewable fuels industry. “However, 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,” the letter concludes.
For a copy of the letter, click here: http://bit.ly/budGtQ.share on facebook share on twitter