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Ethanol Subsidies: Are They A Plus Or A Minus?
By Mr Ethanol | October 22, 2008
CattleNetwork.com:
Despite many years of supply management farm policies that included target prices, loan rates, and deficiency payments, many farmers indicated they would rather get their income from the marketplace. For the past two years, that has happened. Or has it?
Early years of government farm subsidies were designed to not only keep farmers on the land, but to provide low cost food to the urban public. Compared to most other countries the US has maintained the lowest cost for foods, despite the run-up in food prices earlier this year. But agricultural economist Dermot Hayes and his colleagues at Iowa State University say farm income is still subsidized, it is just disguised a bit.
The Iowa State research investigates the relationship among farm income, federal subsidies, and public financial support for the ethanol industry. They define ethanol subsidies as:
1) The 51¢ per gallon blenders’ credit that will drop to 45¢ in January.
2) The Renewable Fuels Standard that requires increasing amounts of gasoline to contain 10% ethanol over time.
3) The 54¢ per gallon tariff on imported ethanol.
The researchers attempt to look at the overall ethanol, gasoline, and fuel market and determine the financial benefit of the subsidies, and then calculate the financial benefit to agriculture and energy industries.
Instead of criticizing the subsidies as many economists, they contend the blenders’ credit and the tariff on Brazilian ethanol are a wash, since any Brazilian ethanol would benefit from the blenders’ credit.
Additionally, they say the ethanol mandate was the result of high energy prices and was an effort to offset them. As part of the ethanol demand benefits to corn growers, the researchers say there was a reduction in government price subsidies to corn and other crops as a result.
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October 24th, 2008 at 12:56 am
Great site,I found it on my bloglog. Ethanol seem like a great fuel source, considering the alternatives.