National Turkey Federation's Comments on Secretary Agriculture's Statement about Ethanol Bailout
Washington, D.C., October 31, 2008 -
For 30 years the ethanol industry has received subsidies from the American taxpayer. It is an industry that has always been dependent on government largesse for its existence. Perhaps, then, last Friday’s (Oct. 24) announcement by Agriculture Secretary Ed Schafer that the government is considering offering a bailout for distressed ethanol plants shouldn’t have come as a surprise.
Schafer’s remarks are the latest in a long-running debate about appropriate government policy toward ethanol. We simply believe that while ethanol may have a place in the energy landscape, it is high time for the so-called “fuel of the future” to stand on its own two feet without government subsidies or mandates so that the marketplace can work.
For those in the food producing industries, particularly animal agriculture, the debate couldn’t be more urgent. Today, taxpayers fork over more than $4 billion a year in subsidies to the ethanol industry, while government mandates push about one third of all U.S. corn into ethanol production. This naturally drives up corn prices. For industries like the poultry industry that rely on corn for feed, this price spike means increased operating costs. Turkey production is a corn-intensive process with nearly 70 percent of the cost of raising a bird tied up in the feed. The results are grim: billions in financial losses and thousands of eliminated jobs in the sorts of rural communities USDA is supposed to be protecting.
But while animal agriculture is riding the rough waves of corn price spikes, USDA is saying that it wants to bail-out the ethanol industry from the impacts of the very price fluctuations for which it is largely responsible. It is just another example of a philosophy that says ethanol gets a generous safety net – all other industries are on their own.
Forget the fact that such an approach is manifestly unfair. It is also just plain bad policy. We have already begun to see the food price inflation that comes from higher input costs. There hasn’t been a worse period of food price increases since the early 1980s. Moreover, with all of the money the United States has spent on boosting ethanol production, we’ve offset just four percent of its fuel needs.
Perhaps this is why Secretary Schafer’s comments have been the cause of so much concern. When an investment fails, the conventional wisdom says to not throw good money after bad. But that is exactly what Mr. Schafer indicated he wants to do. In fairness, USDA seemed to be walking back from this position, saying that perhaps these loan guarantees could be made available to others besides just the ethanol industry. Mr. Schafer’s own words speak volumes, when he said supporting corn-ethanol is “Important public policy for the country…we are going to continue to support [the ethanol industry] as much as we can.”
That sort of blind determination to push corn-ethanol at all costs has already cost us plenty. It’s soaking taxpayers, pushing up costs for consumers, hammering animal agriculture and all that for questionable energy and environmental benefit. It’s time for our policy makers to lose the rose-tinted lenses when it comes to corn-ethanol. Let’s analyze the costs and benefits of this policy with some rationality and reason – and maybe restore basic fairness in our agricultural policy.
Vice President of Marketing and Communications
National Turkey Federation