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LETTER TO THE EDITOR: Ethanol fumes
The editorial “Stop ‘Big Corn’ ” (Opinion, Monday) did not accurately describe the analysis of ethanol policy conducted by our institute.
The editorial says we at the University of Missouri’s Food and Agricultural Policy Research Institute estimate that the ethanol blender’s tax credit increases the price of corn by “18 cents per barrel.” This appears to be a reference to a report we issued in March that looked at the impact of extending the 45-cents-per-gallon ethanol tax credit, the 54-cents-per-gallon ethanol tariff and the $1-per-gallon biodiesel credit. We estimated that the combined effect of these three policies would be to raise the average producer price of corn by 18 cents per bushel during the 2011-12 corn-marketing year. Individually, each of these policies would have a smaller impact on corn prices.
In addition, the editorial says the Environmental Protection Agency is deciding whether to “boost existing requirements that gasoline contain 10 percent ethanol to 15 percent.” The EPA is actually considering whether to allow 15 percent blends, not whether to require them.
Finally, you cite the cost of the blender’s tax credit as $16 billion per year. That would be the eventual cost of the credit if ethanol consumption reached 36 billion gallons per year and the tax credit were maintained at its current level. We project actual ethanol use in 2010 to be a little more than 12 billion gallons, suggesting that the direct fiscal cost of the credit this year will be less than $6 billion. Without legislative action, the blender’s credit will expire at the end of 2010.
Co-director, Food and Agricultural Policy Research Institute
University of Missouri
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