The chance of eliminating ethanol policies and incentives anytime soon appears unlikely. Several factors are working against livestock producers who are hoping for a change in ethanol policy.
For starters, Congress extended favorable tax provisions for ethanol last December. They include:
- the blender’s credit for ethanol, extended through 2011 at the previous rate of 45 cents per gallon;
- the 54-cent tariff on imported ethanol, continued through 2011; and
- the small-producer tax credit, extended through 2011 at 10 cents per gallon for small ethanol producers producing no more than 60 million gallons of ethanol a year.
In addition, in January, EPA cleared the way for more ethanol use in vehicles by approving an ethanol/gasoline blend of 15% ethanol (E15) for use in 2001-06 cars, light trucks and sport-utility vehicles.
Moreover, demand for ethanol has soared to nearly 5 billion bushels. "That is, on average, double what we are exporting," says Scott Stewart, president and CEO of Stewart-Peterson, a commodity marketing consulting firm based in West Bend, Wis.
"It’s the equivalent to us having doubled our livestock herd," Stewart adds. "In other words, ethanol demand equals feed demand. It used to be that we produced about an 8-billion-bushel crop and half of it would go to feed. Now we have a 12-billion-bushel crop and one-third goes to feed, one-third goes to ethanol and one-third goes everywhere else."