IMPORTANCE
Rapid development of the corn-based ethanol industry to reduce foreign oil dependency has created short-term challenges – with potential long-term impacts – affecting the U.S. pork industry’s competitiveness and the survivability of producers. Given time, the markets will rationalize demand for corn, but the potential for short-term dramatic price swings is jeopardizing the U.S. pork industry’s competitiveness as a domestic food supplier and as an exporter. A short corn crop could dramatically intensify the adverse affects of the situation.

BACKGROUND
When current ethanol plant construction and expansions are complete, 4.5 billion bushels of corn will be required to meet ethanol production capacity of 12.628 billion gallons, representing nearly half of the current corn production. The Energy Savings Act sets a Renewable Fuel Standard (RFS) of 36 billion gallons by 2022, with a cap on corn-based ethanol of 15 billion gallons by 2015. There have been efforts to lift that cap. The ethanol industry has expanded at a rapid pace because of the high price of oil and because of tax credits and subsidies it receives. Petroleum blenders of E10 receive a Volumetric Ethanol Excise Tax Credit (VEETC) of 51 cents per gallon. Ethanol plants benefit indirectly from this tax credit via the blenders’ ability to pay more for the ethanol produced and from increased ethanol demand. The trickledown of the VEETC adds about $1.38 per bushel to what an ethanol plant can pay for corn and still breakeven. In addition, many plants qualify for a federal income tax credit of 10 cents per gallon. This translates into a 30-cent per bushel advantage over other corn-reliant industries. The U.S. ethanol industry is protected from imports by a 54-cent per gallon tariff on ethanol.

NPPC POSITION
NPPC supports the development and use of alternative and renewable fuels, including ethanol, as a way to reduce the country’s dependence on foreign oil but seeks a level playing field for pork producers to compete for corn. Pork producer delegates support allowing the 51-cent blenders tax credit and the 54-cent import tariff on ethanol to expire. NPPC also supports incentives for producers to invest in technologies that capture and digest methane from manure, the use of bio-diesel and renewable diesel made from animal fats and the use of manure as a substitute for synthetic fertilizer.

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