House plan puts ethanol at risk | The Argus Leader | argusleader.com

House plan puts ethanol at risk | The Argus Leader | argusleader.com.

It appears that Kristi Noem is walking a fine line here.  She has to support farmers at the same time follow through on her campaign promise to reduce the size of government.

I’m sure everyone can agree that the unrest in the middle east has put our oil supply at risk.  One look at fuel prices should tell people that something is wrong.   Moving to domestic energy sources is a smart move.    At a bare minimum we should:

  • develop domestic oil supplies
  • develop ethanol technologies (fuel and engines)
  • develop other energy sources

Here’s the catch, we are dead broke.  Our  government is headed for shutdown due to lack of funds.  To make matter worse, other countries may not be willing to loan any more money.

Anyone who has worked a budget know, that when you are out of money you have to cut back.

During debate on the House floor, Rep. Jeff Flake, R-Ariz. called ethanol subsidies “a boondoggle for 30 years,” while Rep. John Sullivan, R-Oklacalled the increase to E15 a “backhanded” mandate that has sparked “alarming consumer, environmental and economic concerns.”

The subsidies may not be a boondoggle,  When the industry first started it needed help to establish itself.  That time has come and passed.  It’s time to take the training wheels off the ethanol industry.  We have given the industry a great start, it is time to for it go it alone.  If the business model and industry is sustainable, it will grow and succeed, if not, it might have to go the way of the personal steam engine makers.

54 Replies to “House plan puts ethanol at risk | The Argus Leader | argusleader.com”

  1. MOSES

    You need to be a true fiscal and vote against ethanol.Ethanol is subsidized just as farms are do what you said you were going to do and vote against the people who sent you to D.C.Also get off Govt subsidized health care.Be a true conservative like the other seven freshman ,republican congress men who turned the subsidized health care away.I m sure I will hear these people who think that we need to subsidize this but if your fiscal vote against it.

  2. Mitch Daniels for Gov

    Not sure our fair state would be around if it werent for federal subsidies. Not sure we would of made it through 2009 if Rounds hadn’t accepted those darn “ObamaDollars.” Not sure Kristi can be from SD and vote against ethanol.

    1. 73*

      If ethanol subsidies take a huge cut on kristi’s watch it probably won’t be much different to ethanol supporters than the fact that SHS voted against obamacare. Who ever is in office will take the heat.

  3. William

    At some point, in the not too distant future, Federal subsidies will end. They’re simply not sustainable and we need to prepare ourselves for it.

  4. Independent

    Ethanol is bad science and is more harmful to our environment. It’s being touted locally because it helps S.D. corn growers. Noem should vote against it, and resign from the government heatlh care plan she’s part of. Or at least make her premiums and coverages public, so we can see just how hypocitical she has become in such a short amount of time. She also needs to join the 7 other Freshman GOP elects who declined the government health care coverage becaues they stand by their convictions and campaign platforms.

    1. A Red Stater

      Ok, I think TC has covered this twice now… Congresswoman Noem is NOT ON the same type of health care plan that is in question under Obamacare. We’ve given you our evidence that she isn’t, now you give us your proof that she is on an Obamacare plan. Oh wait, you can’t… BECAUSE SHE ISN’T!

      1. 73*

        Doesn’t anyone remember the debates during the HC debacle? Congressional leaders made is so that they didn’t have to take the same health care the average citizen would. Theirs is the best!!!

        1. Independent

          I do. And you can bet Noem’s coverage is much better than anything even “Obamacare” has to offer. This is the first of many things that will bite her next election. Funny thign about incumbents, your opponent gets to chose from a bunch of sound bites shwoing how truly phony you are. I’m ashamed to say I voted for Noem. “Fool me once, shame on you, fool me twice, shame on me.”

  5. CaveMan

    Moses, Les, and William; lest we forget the known government concept covering taxes and rebates let me reiterate. Government has been proven by two totally different schools of micro and macro economics to be able to control the economy easily with either a tax or tax rebate. Giving a rebate encourages growth and a tax inhibits growth. Supply side economics has been proven over and over again while the Keynesian theory has been proven to disrupt economic growth. If you want dependence on foreign oil gut the subsidized effort to be self supporting with alternative fuel. More importantly though is the current administrations seemingly endless love affair with the Cap & Trade=Carbon Credits type control of our energy sector which will bring down the American economy faster than any Muslim terror threat could ever hope to.

    1. William

      Caveman,

      Good points, but I personally favor tax credits and/or the elimination of unnecessary regulations to stimulate growth, as direct subsidies require higher levels of taxation to pay for them. Direct subsidies are also prone to corruption, as the government is, in effect, determining winners and losers in the marketplace.

      You’re absolutely right about the disastrous affect that Cap & Trade would produce.

  6. MOSES

    Cave if your fiscal you dont vote for your own health care or ethanal subsidies or farm also.If she isn’t going to do these things, why have a liberal in congress.

    1. wow

      SHS family got subsidy money as well throughout the years; that being said, I do believe it is time to pull the plug on subsidies.

  7. Troy Jones

    I get a kick out of the sheep in the liberal caucus which seems to be rampant here at the SDWC. For thirty years, liberals blasted ethanol skeptics for being naive or stupid or anti-environment for not supporting ethanol. The ethanol skeptics talked about how subsidies distort the economy including raising food prices, gave the science about btu’s required to produce btu’s of ethanol, impact on the environment but the ridicule was harsh and unrelenting.

    Then algore comes out against ethanol and the sheep switch gears so fast my head hasn’t stopped spinning. Liberals are rapidly becoming a joke.

    They can’t think clearly from one issue to the next. They say what they thinks sounds good devoid of rigourous thought and think we should bow down to them.

    They refuse to be accountable for the consequences for their past positions but instead find a way to blame conservatives.

    They rely on simple bromides as “truth.”

    By the way, I’m starting to think Moses is a stealth conservative. Everytime he opens his mouth he proves my point about liberals.

  8. ymous

    Troy-
    Couple things. I agree completely with your above writings. The left’s footings are not built on stone but instead are being used to just take shots at Kristi. I havent been able to figure out why the left took such an abrut change but your right, it was Al Gore. Expensive food out ways the environment evidently. Your writing made sense as well as CaveMean. The economic debate is over as far as I can see to the two basic theories.

    Troy and Kristi-
    Why havent you touched on the Co Parenting bill HB 1255? Its been in the Argus twice on the front page in the last week.

  9. The Truth

    Well, I’m not sure the Argus story was about “subsidies” – I thought it was about market expansion? Ethanol “subsidies” are actually tax credits to oil companies. If and when the congress repeals them, fuel prices will go up. And if ethanol subsidies go away, then so too, should the oil “subsidies” which are about 5-10X that of ethanol. When those oil subsidies (“tax credits”) go away, your fuel prices will go up once again.

    I like tax credits for both ethanol and domestically produced oil. I thought my fellow conservatives – philosophically agreed with taxing things less?

  10. MOSES

    I do beleive ethanol and oil have to stand on their own merits also farmers to, if you can’t make it on 6 dollar corn and 13 dollar beans give it up.

  11. Troy Jones

    Moses, I have no idea how you interpreted so broadly my statement to reach such a generalization. But, for the sake of clarity:

    Regarding farm subsidies:
    1) I understand the intent of the farm program is to insure cheap food for all Americans and national defense (to insure food can’t be used as a weapon against the nation). I also know it has had the secondary effect of slowing the consolidation of farms and elimination of family farms which otherwise would have lead to a more rapid depopulation of rural areas and towns. If cheap food, family farms and viable rural America is a policy goal, farm subsidies are the most cost efficient way to effect this goal.

    2) Anyone who opposes farm subsidies must be prepared to live with the following: higher food prices, farm consolidation and further industrialization of agriculture, and significant migration from the rural parts of our nation to the cities.

    Over the last 30 years, there has been significant revamping of the farm programs (greater emphasis on cheap food and less on the national defense argument) which I think is rational. However, because food has become increasingly more expensive relative to income because of greater reliance on processed food, the farm subsidies are less critical to cheap and available food. Now, the program needs to be considered for what used to be a secondary benefit (viability of rural areas) because of infrastructure issues. Our nation couldn’t afford the infrastructure requirements of a major rural migration while abandoning current infrastructure (public and housing).

    Regarding oil companies:

    1) I’m not for or against oil companies. I’m for cheap fuel to power our economy so we can feed and clothe people. I’m for nuclear, wind, water, coal, oil, natural gas, and sun where economically feasible and efficient. Anyone who thinks each isn’t a vital component to both the near-term and long-term has neither thought about the issues much and anyone who thinks we should eliminate coal or oil in the next 20 years doesn’t care much about the poor who suffer worst without jobs and a vibrant economy. And, to think oil and coal industries can be devoid of big companies is naive. The capital required for exploration, extraction, processing, distribution can only be done by big companies.

    2) I’m for developing alternative technologies to make power more affordable. And I think the role of government is first and foremost in the realm of basic research (which it has always done well), limited applied research (which has only worked where there was an immediate measureable benefit ala defense or space), and very limited direct subsidy with the application of some mandates where the benefit is measurable commensurate with any costs associated with the mandates.

    The throwing the kitchen sink at one alternative (ethanol) over the last 30 years promoted by liberals, environmentists, and the agriculture industry demonstrates the foolishness of the current approach to wind and sun technologies. Soon, we will build an infrastructure excessively expensive relative to the benefits resulting in liabilities that are unsustainable without imperiling basic government functions. If it weren’t so serious, it would be laughable that liberal and environmentalists are demanding we make the same mistake we made with ethanol at the same time they are willing to throw under the bus the agriculture industry they induced to pursue their first failed policy attempt at alternative energy.

    1. larry kurtz


      Ethanol producers got a boost in October when the federal Environmental Protection Agency raised the maximum blend of ethanol in automobile fuel from 10 percent to 15 percent for cars and light trucks built in 2007 and after.

      This week, the National Petrochemical and Refiners Association ? of which Koch Industries is a member ? the International Liquid Terminals Association and the Western States Petroleum Association filed a lawsuit asking the U.S. Court of Appeals for the District of Columbia Circuit to review and overturn the EPA decision.”

      http://www.kansas.com/2011/01/07/1662660/koch-unit-adds-two-ethanol-plants.html#ixzz1FB7PsUbg

    2. usd

      Anyone who opposes farm subsidies must be prepared to live with the following: higher food prices, farm consolidation and further industrialization of agriculture, and significant migration from the rural parts of our nation to the cities.

      Troy,

      Since, we have a cheap food policy that in fact puts more pressure on farmers to make a profit. So that would add to the depopulation of rural America. I disagree with the idea that if you get rid of farm subsidies that more consolidation will happen in fact it may break up some land holdings. The reason, large companies take less risk and the farm programs take risk out of the equation lower profits and lower risk. Yes we would have more market cycles and that would be fine. Smart famers would put a few dollars away so when bad times hit there will be issues some may even store more grain in bad in time when price are not good in fact that would be the natural way to take care of good years and bad years to ensure supplies for natural defense. When times are good we would all have great opportunities and opportunities are why people move to an area.

      It is kind of like bank bailouts yes some banks that we probably all do business should with have been liquidated. And you know what we would have new banks being chartered and/or smaller and better more nimble competitors become bigger and fill the void. People who put so much faith in Government programs don’t really believe in free markets.

    3. DonEWG

      Troy — you have it exactly the opposite on farm subsidies. First, since most current payments are tied to how much land you own, the bigger operations amass the most tax payer funds. The direct payment program pays out $5 billion per year in subsidies to farmers regardless of need in these very good times for commodity agriculture. These big operations than use this taxpayer capitol to outbid their smaller neighbors for land allowing for them to get bigger while the small guys are edged out. The Center for Rural Affairs in Lyons NE has done great research looking at how subsidies have actually accelerated consolidation and the hollowing out of rural America.

      60% of farmers do not receive subsidies — they are reserved for only the largest growers of wheat, cotton, corn, rice and soybeans — fruit and vegetable growers receive nothing — you know, the growers of food — and they seem to do find without them. Being overly reliant on just one or two grain crops has made our food supply less safe.

  12. duggersd

    I am curious about something. A few weeks ago, I made the decision to not use ethanol in my tank. In doing so, I was paying 10 cents per gallon more than I had in the past. Last week when I was driving to RC, I had seen the gas station at Spencer was only about 1 cent more than what I paid in Sioux Falls. I decided to fill there rather than in SF to boost my ability to make it across the state without refilling. Imagine my surprise when I discovered the price I was paying was for the “pure” gas and the ethanol blend was more expensive! Can someone explain how that can happen with the subsidies and all? Check it out and see if I am wrong!

  13. ***Draft Jim Hundstad for US Senate 2014***

    Obviously my hunch has been right and State Senator Jim Hundstad is laying the ground work to be the Democrat voice in the future. Now that Herseth and Daschle are gone from Brown County it appears Hundstad is the Democrats last hope. I would not want to be the candidate facing Jim Hundstad. His oratory skills and the knowledge of “the three legged stool of tax” are unmatched by anyone in the state.

    Tricky road ahead:
    Thune’s challenge is framed by state Sen. Jim Hundstad, D-Bath, and former state Sen. Gordon Howie, a Rapid City Republican and leader in the state’s tea party movement.

    “He is elected by us, and we expect a lot out of him,” Hundstad said.

    As a member of the state Senate transportation committee, Hundstad is aware of the impact of $1.25 billion in federal highway funds that have flowed to South Dakota since passage of the 2004 federal transportation bill and the $183 million in federal stimulus funds spent on roads in the state in the past two years.

    The transportation allocation has contributed significantly to the state’s economy, and the stimulus money allowed South Dakota to nearly keep pace with its federal highway maintenance needs, Hundstad said.

    He calls it money well spent.
    “I hope that is what he meant by fiscal responsibility,” Hundstad said of Thune. “If that’s not what he meant, we have a tremendous problem.”

    http://www.argusleader.com/article/20110227/VOICES/102270322/John-Thune-tiptoes-tightrope-Senate?odyssey=nav%7Chead

    1. Name

      No doubt about it Hundstad is a force in the D party and Thune dodged a tough challenger when Hundstad chose to stay in the state senate last fall.

  14. Name

    Name,
    I’ll take a crack at it. The ethanol tax break or the “volumetric ethanol excise tax credit” is currently a 45-cent per (ethanol) gallon tax credit for gasoline blenders. So, E10 is taxed 4.5 cents less per gallon. That’s a blender credit. The government collects $6-$7 billion less per year because of it.
    Best guess is that the oil and gas industries receive somewhere between $15 billion and $35 billion a year in U.S. tax credits/benefits/subsidies from taxpayers.

    Like ethanol, the U.S. government has generally made the product cheaper with:

    Construction bonds at low interest rates or tax-free, R&D at low or no cost, funded exploration, below-cost loans, income tax breaks that don’t expire like ethanol, sales tax breaks, the strategic petroleum reserve, reduced royalties, etc.

    Technically, all tax credits are subsidies. So I don’t disagree on that point. But, from a pure economic standpoint if the government removes a tax credit for anything then it’s increasing the price. Obviously, tax credits aren’t the same as direct farmer payments and I wouldn’t dispute that. But, the end result for both if removed is the same – and that’s increased prices for consumers.

    Policy wise, if congress wants to have a philosophical debate about tax credits – everything should get thrown into the mix. They shouldn’t pick & choose which “subsidies” they bastardize. So far, the favorite and easiest target is agriculture. And, I’d say it’s minimal by comparison.

  15. MOSES

    Hunstad whos he bring him out I ll debate that guy wherever he wants to be I am from the same party,bet he wouldnt get rid of farm subsidies congressional health care and ethanol; he should run as a republican like these two other jokers in congress.

  16. insomniac

    At the GOP convention every year we get 5 or six people who go through the platform committee suggesting commas etc here or there. It gets old and those people kill the fun of a convention. (They make it take forever!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! – why can’t a secretary be in charge of going over comma placement with the platform committee!!!!!!!!!!!!)

    I only bring this up because a lot of those “COMMA” folks seem to read this blog for typos.

  17. ***Draft Jim Hundstad for US Senate 2014***

    Hundstad is a factor. Trust me the party is in discussion right now with him about his future plans. They know he holds the key to the future for them.

    If you don’t think he is the best VOICE to carry the banner forward than I ask you to name someone better… Exactly there isn’t anyone. Bring on Jim Hundstad!

  18. MOSES

    I know he is probably good but get his name out, lets see how he stands on mandatory funding for all veterans.Willl he say one thing here and another in D.C.

  19. Duh

    UGH. Dilrods. Kristi voted against two amendments which directly attacked ethanol. She voted for the entire bill to cut spending.

  20. Les

    Troy/usd, when I see large families putting two sons and a hub/wife into the operation, it means they can go 4 times the max on payments such as CRP which used to have a 50,000 max per owner.

    It is not uncommon in my area to see 140,000 annual subsidies and when going to the web see Joe Willette of Watertown at 512,553 for 09 at the top. http://farm.ewg.org/top_recips.php?fips=46000&progcode=total&yr=2009&regionname=SouthDakota for a look at the top 20.

    If my ranch was at the peak potential for subsidies, it could possibly do 10,000???, while currently receiving about $22 hundred for a CRP payment.

    There are great risks regardless of what anyone tells you, but, while on main street, my risks were never protected by anyone but myself.

    These large operations buy their fuel by the tanker and almost everything else consumed in their operation bypasses the small business owner in rural America. It clearly shows on a recent trip down through Texas to the gulf, all small rural towns look similar to ours, with the occasional exception due to something other than ag.

  21. Troy Jones

    USD:

    The caps on the farm program make it inherent that the small guy gets more money in farm program payments/benefits on a PER BUSHEL RAISED/PER ACRE FARMED basis. Lower federal farm program subsidies will disproprotionately adversely impact small farmers vs. large farmers. You will have a mass decrease in the number of farms. In reality, to increase the number of farms would require signficant increase in subsidies.

  22. MOSES

    Les is their over 36 thousand people drawing farm subsidies In S.D.I saw from 500 grand a year till about 8 thousand I got to tired scrolling is their a way to pull certain names up like our congress people.

  23. Les

    Troy, what caps are you talking about? The caps that require mom, dad and both kids having their names on the program docs as individual operators? I do not know a farmer who doesn’t pull all the subs cash his operation is capable of pulling on that bushel raised/ per acre farmed.

    You might have to dumb this down for me Troy, but I see the large farm growth is coming from the gov insertion of coverage on risk over the top of the subsidies in the middle of the best commodity pricing in history.

    1. Troy Jones Post author

      Les, yes those caps. You get it but see it as an abuse. I don’t. Let me give you an illustration.

      Granda, two sons, and two grandchildren are farming together. If the $50K cap (I think that is the number but could be wrong), applied to them collectively they would have one choices for their operation would not be able to stay in operation with a single cap: Separate the farms into five small operations operating without any efficiency. This would require higher commodity prices (and thus food) for these five operations to stay in business.

      We have to keep in mind the federal agriculture policy has two over-riding goals (cheap food and national defense). I believe the national defense argument has become progressively weaker than it once was thru the end of the Cold War. While I struggle with the philosophy of ag subsidies like I struggle with the concept of things like FDIC insurance, I’m absolutely confident the end of the farm program would have two very quick consequences:

      1) Family farm access to capital would dry up. The stability of income provided by the farm program allows banks to prudently lend money in what otherwise would be a highly variable revenue stream (hail, rain, fluctuating commodity prices). The only people who would be able to access capital (which agriculture is extremely intensive beyond the price of land ala combines, tractors, planters, etc. which can run in the millions for even an average family farm) would be large operators who could access the national capital market.

      2) Commodity prices within grains would become more volatile without consolidation of farming. Because of the long lead time between discerning what to plant and harvest, an efficient market with millions of decision-makers would have big misses from year to year. Volatility would only be contained to the extent storage was able to smooth the level of each grain.

      3) And, probably most significant will the “middle man” in agriculture would disappear (grain elevators) as we know them. The grain elevators and grain distributors right now keep the system “honest” between the food producers and food processors. They insure market prices are paid and recieved as they “broker” between multiple food producers and food processors. Without the items I mentioned in #1 and #2, those with access to national capital markets would very logically expand into the logistics (transportation/distribution) side of the business decreasing the options for the independent farmer to access the market.

      I suppose there is an alternative by setting an arbitrary maximum size for being allowed to be a food producer. Unfortunately, this is extremely unworkable for a host of economic reasons which would take a book for me to explain. But even if it was workable, to overcome the
      access to capital and price volatility, the price of food would be significantly more expensive. In other words, we have two realistic options if we abandon the current concept of government subsidy of agriculture.

      1) Allow a rapid consolidation to very large farm corporate operations to insure an orderly food supply in the newly volatile and constrained access to capital market. This is what would happen if we got rid of FDIC insurance (only the largest banks would be able to get deposits).

      2) Be ready to bear a significant increase in the cost of food. Using the FDIC insurance example, interest rates would substantially increase as the current “efficiency” in getting deposits would potentially disagree. (Personally, I don’t think in the case of ending FDIC the impact on interest rates would be as much as some predict but I do think it would effectively eliminate the idea of community banking.)

  24. Les

    I think we’re on the same page Troy.

    The definition of family farm has changed along with everything else. No more a chicken coop or milk cow to be found. The young man with a wife and 3 kids farms 15,000 acres and runs 800 head of cows…he would not last without the subs as he grows, though he may become very wealthy in short order as well and not require them for survival.

    Risks moderated by subsidies make that all possible, it is not a balanced playing field, though I will admit, the ag industry had its share of miserable decades with little to no income.

    An aside to my earlier point, subs may be an accurate assessment of keeping family ag healthy, the results of that large family ag is breaking rural American towns and villages and….it is really corporate farming with the Monsanto’s in control as they dictate how to succeed in the minimum margin world of big ag.

    Sooo we really haven’t kept the family farm but given Monsanto and Bungee types the greatest managers they could have asked for as they suck up all those dollars that used to support the rural communities.

    1. Troy Jones Post author

      We are on the same page with regard to Monsanto. What they are doing is an affront to our land, our food supply, and our economy.

      However, I know it is populist to complain about the grain elevators (bunge, etc) and other middle men in agriculture but I think they are the oil which keeps the family farm in business. Without them, you’d have corporate ag with or without subsidies. The more competitors (coop and non-coop) we have, the better it is for food producers. We can see very well what has happened with meat processor consolidation (justified because of economic reasons not only due to the government regulations but also efficience/access to capital) because live animals are inefficient and expensive to ship and the impact on the meat producer.

      Except for the regulatory responsibilities of the PUC with regard to bonding and a few other things, everytime we try to “help” the farmer by doing something to the grain elevators, we take dough right out of the farmer’s pocket similar to how all the well-intended meat regulations have driven small independents out of business and haven’t done a thing about improving meat safety. In fact, it has increased the risk of pandemic’s because everything is so concentrated. E coli in a meat plant will be thousands of homes before it is even discovered. In the old days, it was containable. Now it isn’t.

      But, once again, the liberals good intentions backfire. This and all the other crap they have hoisted on us with actually net adverse effects is why it is harder and harder to even take what comes out of their mouth seriously.

  25. Les

    You are right on many points Troy, and, middle men in grain are few. The local rail here used to have about 7 terminal elevators and now Harvest States owns every one of them here and for miles. They are not the farmers friends as were the coop’s of years gone by. Yes, the more the better, but their game is not working to build a healthier agronomy. The ace in the hole for the local grain farmers of today, is the world markets swinging these few middle men by their tails and that may not last.

    I’m sure you know the Buffalo Commons theory came together by what the Paupers saw happening in the Great Plains, not their plan for the Plains. That being said, these Buffalo Commons has come about through a complex evolution of the family farm which will continue until it is unrecognizable to those of us who can remember the days of gardens and eggs and milk cows in the mix. This change to ag was and continues to be the demise of rural America.

    When you spoke of E coli outbreaks…it is identical to the food shortages and crop failures that will inevitably appear as we farm huge areas to the same crops with no boundries of crop rotation to slow disease or pests.

    Friends of ag are not a part of controlling the industry through the Monsanto equation as the above mentioned are. BTW, we already have corp ag in the form of all these young managers dedicating their lives to corporations who control the germination of almost every seed we produce.