In previous Blogs and Newsletters, we have warned often about probable changes in subsidy laws and payments, both because of U.S. budget problems, and because farming has become more profitable.
Suddenly (and most corn growers are aware), on December 31, all tariffs and tax credits protecting corn ethanol have been removed. Brazilian sugar cane growers are ecstatic. As stated by Marcos Jank, president of Brazilian Sugar Cane Growers Association, “We have been waiting for this for over 30 years.” Now both countries can compete for the ethanol market directly, and without subsidies of any sort.
Brazilian sugar cane has other advantages over corn-based ethanol; a.) it takes less land to grow comparable ethanol producing sugar cane than corn; b.) it takes less fossil fuel to grow and convert sugar cane to ethanol; c.) cars run well on a higher proportion of cane-based ethanol to gasoline, 18-25% vs. 10% corn-based ethanol. In fact, some vehicle manufacturers, especially motorcycle makers are suggesting no ethanol usage as it is beginning to damage rubber parts in fuel systems (the jury is still out).
The cynics among us have concluded the only reason the subsidies lasted so long was because Congressmen and Senators in corn producing states have been effective in protecting the subsidies, and Iowa is the first state to hold Presidential caucuses, so what candidate in the Iowa caucus would want to suggest ending tariffs and subsidies?
Despite the sudden end of tariffs and subsidies, we still see a huge world-wide demand for corn, and therefore do not foresee a market bust. Nonetheless, we urge our farmers to watch world events and changes, always increasing in number and consequence. Because we carefully watch all governmental activity, let us know of any questions you might have. We insist on “Seeing a trend before it becomes a trend.”
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