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Livestock and Poultry Groups Call for End of Ethanol Subsidies, Protective Tariff

Friday, July 16, 2010

Washington, D.C. — The nation’s largest livestock and poultry trade associations today asked the Senate leadership to allow a 30-year-old tax credit and a protective tariff for ethanol to expire as scheduled at the end of the year.  The request was made 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 groups said in its letter.  “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 now is considering whether to extend the ethanol blender’s credit and the tariff on imported ethanol. Both expire at the end of 2010.

The groups noted their serious concerns over the negative economic effects on animal agriculture that government support for corn-ethanol has had, 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 groups pointed out 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.  The CRS report said that “the main driver was feed, which may account for 60 percent to 70 percent of total livestock production costs in any given year.”  Between 2005 and 2008, corn prices quadrupled, reaching a record high of more than $8 a bushel, a pattern that is unsustainable for our industries, the groups said.

“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 groups wrote.  “While there has been some recent relief in corn prices, current market prices are still 50 percent higher relative to pre-RFS conditions.”

 The groups said animal agriculture has suffered serious economic hardship, including:

The letter noted the Congressional Budget Office (CBO) report released this week, titled “Using Biofuel Tax Credits to Achieve Energy and Environmental Policy Goals,” found that producers of ethanol made from corn or 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 groups reminded 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,” they said.

For a copy of the letter, click here: http://bit.ly/budGtQ.  

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