On Fri, 21 Apr 2006 19:03:37 -0500, "Ranieri" <nah> wrote in
misc.fitness.weights:
Quoted message said:
"Jason Earl" <[email hidden]> wrote in message
Quoted message said:Besides, ADM isn't really to blame for our current farm subsidies,
ADM's involvement is merely part of the market reaction to a mistake
made quite a while ago. The roots of our corn subsidies lie in the
government trying to increase production for sale to the Soviet Union
in the 70s. You can blame "big business" if you want, but that
doesn't make it ADM's fault.
Actually the ethanol subsidies are a different issue than the farm subsidies
to which we've grown so accustomed. If you have some time and want to get
[censored], here's a report from the Cato Institute.
http://www.cato.org/pubs/pas/pa-241.html
http://www.twincities.com/mld/twincities/business/14402479.htm
Booming ethanol plants get large state subsidies
Minnesota still hands over $26 million a year to industry 'drowning in
profits'
BY TOM WEBB
Pioneer Press
Ethanol was just a 98-pound weakling in the late 1980s, when Minnesota
officials first decided to muscle it up into a strong and prosperous
industry.
Today ethanol is booming as oil prices soar, yet Minnesota taxpayers
still are priming the pump. Taxpayers continue to be billed $26
million a year to subsidize 11 privately owned ethanol plants that are
now profitable beyond anyone's dreams.
Purdue University economist Wally Tyner calculates that at today's
fuel prices, even an ethanol plant costing $100 million can be fully
paid off in less than a year. "They're hugely profitable, that's why
so many of them are being built," Tyner said.
Yet Minnesotans are funding ethanol subsidies even beyond that. Four
times a year, the state sends checks to the farmers who own the 11
plants. The next payday arrives in May, when another $4.3 million will
be paid, plus another $2.3 million in IOUs the state promises to pay
later.
"The industry itself is basically drowning in profits right now, which
I'm happy for, but why would we want to send them (more subsidies)?"
said ex-farmer Alan Roebke of Chaska, a critic of current farm
policies. "It's absolutely ridiculous."
Some corn growers don't agree. Gerald Tumbleson, a Martin County
farmer who has invested in three ethanol plants, has seen benefits
sprout across rural Minnesota as ethanol plants generate sales, jobs,
energy and optimism.
"For every $30 million invested, they got back $400 million" worth of
economic activity in rural Minnesota, Tumbleson said. "It was one of
the best investments that Minnesota ever made."
DEMAND IS FEVERISH
In the past year, almost everything has changed for ethanol. Soaring
gasoline prices have sent ethanol prices skyrocketing. Demand for new
plants is so feverish that construction firms are booked until 2008.
Refiners are clamoring for the corn-based fuel, amid worries of an
ethanol shortage. But none of that has stopped the parade of state
subsidy checks.
Back in 2003, the Legislature did consider scrapping the state subsidy
because ethanol, even then, was solidly profitable. But the corn
farmers who owned the plants objected. The program stayed.
But back then, oil was under $30 a barrel. Today it has soared to $75
a barrel. Yet now there's virtual silence at the Minnesota Capitol
about reworking the ethanol producer payment.
"The Minnesota Legislature made a commitment, and they intend to keep
it," said Jim Boerboom, assistant commissioner of agriculture.
But did anyone think that prices for oil would climb so high?
"No, absolutely not," Boerboom said.
Over the years, $274 million in payments have been sent to Minnesota
ethanol producers, along with $45 million in IOUs. On every gallon of
ethanol, the state pays producers 20 cents — 13 cents quarterly, and 7
cents more in deferred payments — up to 15 million gallons per
producer.
Minnesota is now the nation's No. 3 ethanol producer, with 16 plants
making 550 million gallons of ethanol a year.
"Without those producer payments, we probably still wouldn't have
much, if any, ethanol production in the state," said Ralph Groschen of
the state Agriculture Department.
SHUNNED IN '80s
The roots of the subsidy program go back to the ruinous farm crisis of
the mid-1980s, when corn-based ethanol offered one glimmer of hope.
Officials tried, but no corporation was interested back then in
building an ethanol plant in Minnesota. Battered rural banks couldn't
take the risk, either.
"We were losing thousands of farmers a year, and a good two-thirds of
our corn was exported, unfed and unprocessed, and Minnesota corn
prices were among the lowest in the country," Groschen said. "Since
the large corporations declined to build here, we helped farmers to
build their own plants."
The partnership worked like this: Once local farmers raised $10
million in start-up money for a new plant, the state promised 10 years
of payments. A plant that produced up to 15 million gallons of ethanol
a year could collect a maximum of $3 million a year.
"When these plants went up in these small towns, my goodness, it was
really a shot in the arm for these rural communities," Groschen said.
And when the first plants proved profitable, farm cooperatives usually
built a second plant, and sometimes a third.
Several Minnesota plants have now collected more than $25 million each
through the program. Roebke, a former Minnesota ethanol plant investor
himself, does the math.
"FIRST PLANT IS FREE"
'We basically give 'em the first plant for free," said Roebke, who now
runs a Web site on farm and energy policy. "The second one, they'll
have to pay for, but the first one is free."
During the 1990s, when oil prices were mostly under $20 a barrel, the
ethanol subsidy kept the industry profitable. So did the state
requirement that every gallon of gasoline sold in Minnesota contain a
10 percent ethanol blend.
Minnesota's producer payment is set to expire at the end of this
decade. Gov. Tim Pawlenty, a Republican, proposed ending it in 2003
during the state budget crisis, but rural Republicans strongly
objected. The Legislature settled for spreading out the payments
instead.
"The rural areas out there are still politically quite powerful, and
they do continue to lean Republican," said David Strom, president of
the Minnesota Taxpayers League and a foe of all ethanol subsidies.
"It's a very powerful and important Republican constituency."
MARKET COULD CRASH
Vern Eidman, a biofuels specialist at the University of Minnesota, has
talked to farmers who worry that the volatile commodity markets could
crash as quickly as they soared.
"They clearly understand subsidies aren't needed at the current time,
but what they're worried about is, what will happen if they're taken
away and then they're needed again," Eidman said. "This is a commodity
business."
To date there's been very little grumbling about ethanol subsidies as
gasoline nears $3 a gallon, but that may be changing. The Wall Street
Journal recently editorialized against the "heavily subsidized
domestic ethanol industry that is getting rich off U.S. drivers."
And economists like Purdue's Tyner think a rewrite of ethanol
subsidies makes sense, so that farmer-owners are protected during
times of hardship, not lavishly rewarded during booms.
U.S. taxpayers will pay over $2 billion in federal ethanol subsidies
this year, and he doesn't blame farmers for taking the money.
"If I gave you the choice of, 'Would you like $2 billion or not,' what
would you say?" he asked. "But is it good public policy?"
Tom Webb can be reached at [email hidden] or 651-228-5428.
$26 million
Amount Minnesota taxpayers pay each year to subsidize ethanol
production
$1.10
Typical cost of producing a gallon of ethanol in Minnesota
$2.50
Recent selling price per gallon for Minnesota-produced ethanol
20 cents
State subsidy on every gallon of ethanol produced, up to 15 million
gallons
