Food Vs. Fuel And The End Of the Volumetric Ethanol Excise Tax Credit

 

The whole “Food vs. Fuel” debate is fascinating. The fact is that the U.S. now uses more corn for fuel than it does for food.  In a time where one in five American children goes to bed hungry every night, people have a big issue with food being used as a fuel source. On that bombshell, the Volumetric Ethanol Excise Tax Credit (VEETC) is coming to an end.

National Corn Growers Association president Garry Niemeyer, a farmer from Illinois, recently wrote an editorial expressing his opinion. VEETC expires by the end of the year and, as Mr. Niemeyer points out in his editorial, no one on the side of ethanol — meaning, the corn growers and others in the ethanol business — have tried to stop the death of VEETC. Mr. Niemeyer points out that, in the minds of the ethanol industry, the tax credit is already dead, and that the industry has known this for a while.

Rather than relying on the tax credit, the ethanol industry is in a stage of growth looking for alternatives to grow the ethanol industry. The ethanol industry has recognized that federal tax credits are not going to last, especially in a time where money in the U.S. government is very tight. Adapt or die seems to be the message and Mr. Niemeyer alludes to the fact that the ethanol industry has, indeed, adapted, and that the industry is not going six feet under – although many people wish it would.

Within the editorial, Mr. Niemeyer does take some jabs at groups and news articles that, in his view, have made some error. Mr. Niemeyer blasts the Green Scissors Project by saying that that the project’s accounting figures are in error by as much as 10% concerning ethanol expenditures.

The Green Scissors Project is designed to be a road map of spending changes allowing Congress to save up to $380 billion over five years by curbing wasteful spending that harms the environment. The Green Scissors coalition is a diverse group of public policy organizations including progressive environmental group Friends of the Earth, deficit hawk Taxpayers for Common Sense, consumer watchdog Public Citizen, and free-market think tank The Heartland Institute.

Depending on one’s stance on the issue of the future of the ethanol industry, this editorial can come across as reassuring — the industry is ready for the future and does not need any federal tax credit to stay afloat. Or, the editorial comes across as indicating that the ethanol industry is in deep trouble and the president of the National Corn Growers Association wrote this as a last gasp to keep hope within the industry alive.

Garry Niemeyer’s complete editorial can be found here.

The fact remains that VEETC is done and certain groups are happy to hear this, including representatives from the livestock, dairy, and poultry industries. Representatives from the livestock, dairy, and poultry industries testified on Sept. 14th about feed availability, or feed unavailability, in front of a subcommittee of the U.S. House Committee on Agriculture. The majority pointed to the ethanol industry as a main factor in rising feed prices and called on Congress to end government subsidies, particularly for corn ethanol.

Feed represents more than 70% of the cost to produce meat, poultry, dairy, and eggs, said Philip Greene, vice president of Foster Commodities, a poultry farm company. “Anything—I repeat, anything—that affects the cost of producing feed for livestock and poultry, directly impacts the cost of animals to the processor, meat, dairy and eggs to the retailer, and ultimately, the cost of food to the consumer.”

The “Food vs. Fuel” debate is far from over, but with VEETC coming to an end, the hope is that food prices will begin to drop, or at least level out. To put things into perspective, this past year alone, there was an overall increase of 5% to 7% in food prices, including increases of 11% for dairy and eggs, 10% for fresh vegetables, 7 % for baked goods, and 5% for meat in the United States.

Source: domesticfuel.com | Image: Carolina K. Smith via shutterstock

Andrew Meggison was born in the state of Maine and educated in Massachusetts. Andrew earned a Bachelor’s Degree in Government and International Relations from Clark University and a Master’s Degree in Political Science from Northeastern University. Being an Eagle Scout, Andrew has a passion for all things environmental. In his free time Andrew enjoys writing, exploring the great outdoors, a good film, and a creative cocktail. You can follow Andrew on Twitter @AndrewMeggison

 

 

Andrew Meggison

Andrew Meggison was born in the state of Maine and educated in Massachusetts. Andrew earned a Bachelor's Degree in Government and International Relations from Clark University and a Master's Degree in Political Science from Northeastern University. In his free time Andrew enjoys writing, exploring the great outdoors, a good film, and a creative cocktail. You can follow Andrew on Twitter @AndrewMeggison