In the March 8 Corn E-Digest, I wrote about the need to pressure Congress to extend the Volumetric Ethanol Excise Tax Credit (VEETC), which expires at year’s end. Since then, two news reports have been published that affirm the importance of extending VEETC, or the blenders tax credit, to U.S. corn growers, the nation’s ethanol industry and our rural economy.
The first news item is an article by Cole Gustafson, a North Dakota State University biofuels economist, who conducted a study on the economic repercussions that removing VEETC would have on existing ethanol plants. The study results show that “when the blenders tax credit subsidy was removed … the risk of bankruptcy rose to 52%,” writes Gustafson. “This is a 16-fold increase from baseline conditions and jeopardizes an ethanol plant’s financial well being.”
To read more about Gustafson’s study, click here. http://www.ag.ndsu.edu/news/columns/biofuels-economics/new-energy-economics-removing-ethanol-subsidy-increases-bankruptcy-risk/.
The second news item showing the importance of VEETC, especially for corn growers, comes from Scott Irwin and Darrel Good, University of Illinois economists, in an article about corn production scenarios. In the article, they write, “After appropriately adjusting the amount of corn used for ethanol by the production and feeding of the co-product distillers grains, net use of corn for ethanol production has increased from about 1.07 billion bushels in the 2005-06 marketing year to a projected 2.88 billion bushels in the current marketing year. Ethanol use accounted for 9.5 percent of total use in 2005-06 and a projected 22 percent in 2009-10.”
If Congress fails to extend VEETC, and bankruptcy risks to ethanol plants increase 52% as Gustafson predicts, can corn growers afford to see 22% of their market for corn disappear? I think not.
So, the bottom line is, if you want to see continued prosperity for the nation’s corn growers, rural communities and home-grown, renewable fuels like ethanol, continue to pressure Congress to extend VEETC. The National Corn Growers Association (NCGA) has a Web link to expedite the process.
Whether you agree or disagree with me on extending VEETC, I’d be happy to consider your opinion on the topic. When writing, please let me know your name, where you farm or work, what your comment is and whether or not I have permission to use your comment in a future Corn E-Digest newsletter. You can contact me (John Pocock) at: [email protected].
You're also welcome to write to me if you have concerns or questions about this newsletter or if you have ideas on topics you’d like to see me write about for future issues. I look forward to hearing from you.