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Corn+Soybean Digest

Ethanol Tariff Safe For Now

We're already overly dependent on foreign oil to fuel not only our gas guzzlers but also our economy. It's painfully obvious how much that oil is costing us when we pull up to the pump.

We're devoting several pages of editorial in this issue to the ethanol and biodiesel front, hoping to provide new perspective on what's driving corn and soybean prices higher and who the winners and losers are.

I've seen those higher corn prices, a direct result of government mandates for more biofuels, put some Goliath smiles on farmers' faces — especially for those who have invested in ethanol plants.

With some 120 ethanol plants in operation and 80 or more under construction, the momentum for growing corn to feed those plants seems rock solid.

Almost as important, though,is the Senate's recent action not to repeal the 54¢/gal. tariff on imported ethanol. With that, farmers have essentially been given a green flag to keep adding corn acres to feed those hungry plants.

This 54¢ tariff makes imported ethanol more expensive, just as the 51¢/gal. tax credit makes domestic ethanol cheaper. It also protects American taxpayers from subsidizing already-subsidized ethanol from countries like Brazil.

Still, one opponent of the tariff, Sen. Judd Gregg, R-NH, says he'd rather buy ethanol from friendly countries such as Brazil than oil from troublesome governments such as Hugo Chavez's regime in Venezuela.

On the flip side, Sen. Chuck Grassley, R-IA, is quick to point out that we don't want to become dependent on foreign ethanol, like we are with foreign oil.

Already, imports rose sharply last year to 729 million gallons after a spike in U.S. ethanol prices.

Without a tariff, however, some speculate that importing cheaper ethanol could bring relief to fuel prices. Plain and simple, ending the tariff and importing tankers of sugarcane ethanol from Brazil has plenty of supporters. In fact, the Senate's defeating vote of 56-36 isn't exactly what you'd call overwhelming.

So just how long will the tariff remain in effect? “It's in place until 2010 and it's critical that we keep it so we can build our ethanol infrastructure,” says Ken McCauley, president of the National Corn Growers Association. “The tariff is safe and President Bush and Sen. Grassley are solid on it.”

Brian Jennings, executive vice president of the American Coalition for Ethanol says, “Even though the vote indicates the majority of the Senate is on our side, and the tariff is not going anywhere, elections change, who makes up Congress changes and the marketplace could change. That's why we absolutely need to be vigilant. We in the ethanol industry can't rest on our laurels.”

Any booming industry has growing pains and biofuels, especially ethanol, has plenty. Fortunately, farmers are well represented in this industry, so stay on top of the issues affecting renewable fuels. It all trickles down to you and the acres you plant.

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