Corn Festivals and Thoughts on Juicy Tax Expenditures

Zellwood Florida’s Sweet Corn Festival started the season last week, with another 2 dozen corn festivals around the U.S. later in the year.  These festivals are fun, safe, low cost and benign excuses for a community fundraiser.  Zellwood had plenty of arts and crafts, exhibits, musical entertainment, and plenty of sweet corn to eat.  But unlike the sweet corn featured at Zellwood, the other 99%, of corn is field corn and it may hold sweeter promise for the consumer even though it was not mentioned at the festival.

 

Of the 13 billion bushel field corn crop, 36.5% is converted to ethanol fuel, 38.7% to feed & residual products, and about 10% to human foods (starch, corn oil, and sweeteners).  Corn ethanol is blended into domestic gasoline or is exported to the Middle East, Europe, Canada, and notably to Brazil for automobile fuels.  Brazil has 11 million flex-fuel automobiles and adds 2-3 million more each year.  Brazil relied on its sugar cane ethanol until consecutive years of bad weather hampered cane growth.  It has become an eager buyer of U.S. ethanol.

 

Our quest for fuel self-sufficiency and lower pollution identified ethanol as a partial answer, but cars get fewer miles per gallon from ethanol than advocates promised and cars built before 2001 cannot tolerate more than 15% ethanol.  Nevertheless, government sends $6B per year in subsidies to corn growers and ethanol producers.

 

Ethanol produces less carbon emissions than gasoline, but the amounts of water and fuel required to produce ethanol offset that advantage.  Also, ethanol-gasoline blends cannot go through pipelines for chemical reasons, so ethanol is transported by rail or truck, adding cost and more carbon emissions.  These downsides have weakened environmentalist support for ethanol as a fuel.

 

Investment analysts have been sizing up the outlook for ethanol exports and domestic demand:

“Many U.S. ethanol producers believe they are approaching the point where they can compete without state or federal support. The 45 cent per gallon blenders credit (VEETC) is due to expire at the end of this year and some new legislation would provide a safety-net for producers… However, U.S. producers may not need it…”

 

With the upcoming search for tax expenditures that can plug budget holes, corn ethanol subsidies seem ripe for harvest – it’s $60 billion over 10 years! 

 

Alan Daley is a retired businessman living in Florida.  He follows public policy issues from the consumer’s perspective

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