Allowing the blender credit and tariff – aimed at encouraging ethanol production – to expire would have neither the dramatic adverse effect U.S. ethanol producers claim nor create the export bonanza foreign producers hope for.
That’s according to a new staff report, "Costs and Benefits to Taxpayers, Consumers and Producers from U.S. Ethanol Policies," by Bruce A. Babcock, director of the Center for Agricultural and Rural Development (CARD) and an Iowa State University professor of economics. Among the report highlights:
- U.S. ethanol production would increase to some 14.5 billion gals. by 2014 without the tax credit and import tariff; U.S. imports of Brazilian ethanol would rise modestly to about 740 million gals. – less than 5% of the total U.S. ethanol market.
- If the mandates are kept in place but the tax credits and trade protection are allowed to expire, no more than 300 jobs would be lost in the ethanol industry in 2014.
- Ending the tax credit and tariff would reduce ethanol prices by 12¢/gal. in 2011 and by 34¢/gal. in 2014. Because most gas sold in the U.S. contains 10% ethanol (a limit the Environmental Protection Agency may increase to 15% this fall), lower ethanol prices lead to modest savings at the pump: 1-2¢/gal. next year and 3-5¢/gal. in 2014.
- Opening the U.S. market to all producers would reduce price volatility by acting as a price shock absorber, meaning that in years when domestic ethanol production is low, imports would lower the consumer cost of meeting blending mandates.
- The Renewable Fuel Standard (RFS) is the primary driver of ethanol demand. The tax credit prompts blenders to use about 900 million gals. of ethanol each year above mandated levels. This costs taxpayers some $6 billion annually (or almost $7/gal.). Ending the subsidy would save that amount.
For the week ending July 25, according to the National Agricultural Statistics Service:
Corn – Progress is at or ahead of last year and average in all estimating states. 84% is at or beyond the silking stage, 32% more than last year and 14% more than average. Near-to-above-average temperatures throughout much of the major corn-producing areas continued to promote rapid phenological development of this year’s crop despite abundant to locally excessive soil moisture levels. 17% is at or beyond the dough stage, 10% ahead of last year and 4% ahead of the average pace. Doughing was furthest ahead of last year and the five-year average in Illinois, the second-largest corn-producing state, where nearly ideal growing conditions had pushed progress to 20 days ahead of last year’s growing pace. 72% is in Good to Excellent condition, 2% more than a year ago.
Soybeans – 75% was at or beyond the blooming stage, 15% ahead of last year and 3% ahead of the average. With the exceptions of Kentucky, Louisiana and Mississippi, double-digit blooming was evident throughout the major soybean-producing areas. Nationally, 35% was setting pods, 16% ahead of last year and 4% more than the five-year average. Crop development was most rapid in Illinois, Iowa, North Dakota and Ohio, where 21% or more of the crop began setting pods during the week. 67% is rated in Good or Excellent condition, the same as last year.
Winter wheat – 79% is harvested, 3% ahead of last year, but 3% behind the average pace. While harvest was complete or nearly complete in more than half of the 18 major estimating states, producers in the Pacific Northwest and Montana were just getting started or had yet to begin combining this year’s crop. The most significant delay was evident in Montana, where overall progress was over two weeks behind normal following slowed crop growth earlier in the season.
Spring wheat – 94% was at or beyond the heading stage, 2% ahead of last year but 3% behind the five-year average. Heading was complete or nearly complete in all estimating states except Idaho and Montana, where despite double-digit head development during the week, progress remained 10% and 16% behind normal, respectively. 83% is in Good to Excellent condition, 9% more than last year.
Sorghum – 43% of the crop has headed, which is 9% ahead of last year but 2% less than the average. Warm temperatures in and adequate soil moisture levels provided ideal growing conditions in Kansas, the largest sorghum-producing state, where 11% of the sorghum crop began heading during the week. 26% of the crop is coloring, which on par with last year but 1% less than average. The most significant delay was evident in Texas, where the need for additional soil moisture limited crop growth. 71% is in Good to Excellent condition, 19% more than the same time last year.
Oats – 30% is harvested, 16% ahead of last year and 4% ahead of normal. Mostly sunny days allowed ample time for oat producers in all estimating states to harvest 11% or more of their crop during the week. The exceptions were North Dakota, where harvest was just beginning, and Texas, where harvest was nearly complete. 78% is reported in Good or Excellent condition, 23% more than at the same time a year ago.
Barley – 90% is at or beyond the heading stage, which is 3% behind last year and 5% behind the five-year average. While heading was complete in Minnesota and Washington, progress continued to trail normal in Idaho, Montana, and North Dakota, the three-largest, barley-producing states. 86% is reported in Good or Excellent condition, 9% more than at the same time a year ago.
Pasture – 62% of the nation’s pasture and range is rated as Good or Excellent, 12% more than at the same time last year. 13% is rated Poor or Very Poor, compared to 23% a year ago. States reporting more than 25% of pasture as Poor or Very Poor were: Arizona (52%); California (25%); Maryland (54%); North Carolina (47%); Pennsylvania (48%); South Carolina (25%); Virginia (71%); and West Virginia (35%).