Corn Ethanol Subsidy Terminated: But Did Anyone Care?

Farmers are enjoying high corn prices and may not even have noticed the end of the subsidy on Dec. 31 according to the agricultural economist interviewed on NPR.
January 4, 2012, 2pm PST | Irvin Dawid
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"(A)s Iowa prepares to caucus today, Congress let the formerly sacred subsidies expire after more than 30 years and about $20 billion. To talk more about why the era ends now, we called Bruce Babcock. He's the Cargill chair of energy economics at Iowa State University.

BABCOCK: Well, most farmers haven't even realized it's gone, because the price of corn has been so high, and it continues to be high with or without the subsidy. So at the farm level, it hasn't really had much of an impact on them."

As it turned out, the subsidy check went to the refinery, not the farmer, to encourage them to buy corn.

In addition to the subsidy, costing U.S. taxpayers about $6 billion last year, ending, the protective tariff ended as well. But Babcock explains that Brazil's "demand for ethanol has skyrocketed over the last few years, and their domestic supplies haven't been able to keep up. So, somewhat surprisingly, the U.S. has been supplying Brazil with ethanol."

From NYT: After Three Decades, Tax Credit for Ethanol Expires: "We may be the only industry in U.S. history that voluntarily let a subsidy expire," said Matthew A. Hartwig, a spokesman for the Renewable Fuels Association, a trade group for ethanol producers. "The tax incentive is less necessary now than it was just two years ago. Ethanol is 10 percent of the nation's gasoline supply."

"As Congress begins work on a new farm bill, ethanol companies and gasoline station owners want to expand a federal program that helps pay for pumps and other equipment needed to dispense gas with higher concentrations of ethanol."

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Published on Tuesday, January 3, 2012 in NPR: Morning Edition
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