ISU study: ethanol tax break impact modest

Des Moines Register
Blog post by Dan Piller • dpiller@desmoine.gannett.com • November 18, 2010

A study of the economics of ethanol by Iowa State University professor Bruce Babcock suggests that were to congress allow the 45-cent per gallon tax break for domestic ethanol production and the 53-cent per gallon tariff on ethanol imports to lapse at year’s end the impact would be modest for ethanol producers and corn farmers.

Babcock notes that corn prices have risen by 50 percent or more since June and said “although the arguments in support of and against their (tax credit) extension have changed little since the summer, the economic situation in the corn, livestock and ethanol industries have changed dramatically.”

Were the tax break to lapse, the price of corn would crop from the current level of $5.40 per bushel to about $4.85 per bushel, said Babcock. That price would still be profitable for farmers, whose break even price for corn production this year has run around $4 per bushel or less.

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