Thomas Mott Osborne: “Yesterday the House passed an energy bill, the first comprehensive energy bill that we have had in more than a decade.…”

“Yesterday the House passed an energy bill, the first comprehensive energy bill that we have had in more than a decade. It is now being considered by the other body. I would like to talk about just one small part of the energy bill and that is the ethanol industry. Sometimes this is controversial. Many times people feel that this is simply a giveaway to the Midwest and particularly to farmers, but I would like to take another look at this. It is true that the ethanol tax credit is 52 cents a gallon. In 2003, we produced 2.7 billion gallons of ethanol, so that amounts to a $1.4 billion tax incentive. Of course, that is a cost to the taxpayer. But that is not the end of the story. The ethanol industry increases the demand for corn by roughly 10 to 15 percent and as most people understand, when the demand goes up, it also drives the price up. What happens is that we, because of the ethanol industry, increase the price of corn by a minimum of five to 10 cents per bushel, and in 2002 it is estimated that the price of corn increased by roughly 40 to 50 cents per bushel. As prices rise, farm price supports decrease. For instance, if a bushel of corn brings $1.50 a bushel, the price support at $1.50 is 82 cents in the farm bill. If the price goes to $2.70, there is zero price support. As a result, what we have found is that the increase in price driven by ethanol decreases the cost of the farm bill by roughly $1 billion.”