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AMI Urges Senate Leaders to Allow Ethanol Tax Credit and Protective Tariff to Expire

Friday, 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 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.

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