Corn Politics

Published in CSP Daily News

Support for ethanol subsidies weak, waning among GOP presidential hopefuls

DES MOINES, Iowa -- For decades, nearly every candidate who hoped to win the presidency has visited this state to pledge their allegiance to "King Corn" and to the government subsidies that have upheld its price and increased demand, reported The Los Angeles Times.

But for the first time, the Republican field is dominated by candidates who want to do away with such subsidies.

Corn still matters in the Hawkeye State. Iowa farmers produce more than 2 billion bushels annually, the report said, more than 40% of which is used to make ethanol, a fuel additive that [image-nocss] the government had hoped would reduce American dependence on foreign oil.

The state is the beneficiary of a number of agricultural subsidies, but ethanol is the one that has typically drawn the most heat, said the report. The subsidy--which goes to the fuel blender, typically an oil company--costs the nation $6 billion annually. Although the farmers do not receive the subsidy, they benefit because increased demand for corn has raised prices, said the report.

The subsidy is set to expire at the end of the year, and even ethanol industry groups and the Republican senator from Iowa, cognizant that it has fallen from favor, are amenable to some reductions, said the Times.

The GOP field largely opposes the subsidy. Former Senator Rick Santorum and businessman Herman Cain have said they favor phasing it out, while Representative Michele Bachmann (R-Minn.) has called for a reexamination of all energy subsidies. Representative Ron Paul (R-Texas) has long opposed all subsidies. Former Massachusetts Governor Mitt Romney has supported such subsidies, but has said they should be phased out once an industry is established. (Former Minnesota Governor Tim Pawlenty, who opposed the subsidies, has dropped out of the presidential primary race.)

Texas Governor Rick Perry, once the state's agriculture commissioner, was previously in favor of the subsidies, but started coming out strongly against grain-based ethanol in 2007, said a report by The Austin American-Statesman.

A CSP Daily News Poll earlier this week asked, "Now that Texas governor Rick Perry has thrown his hat in the ring and ex-Minnesota governor Tim Pawlenty has withdrawn, regardless of your political affiliation, which declared Republican candidate do you want to see win the 2012 presidential nomination?

Here are the results (out of approximately 170 respondents): Rick Perry, 33.7%. Mitt Romney, 25.3%. Michele Bachmann, 9.6%. Other, 6.0%. Ron Paul, 5.4%. John Huntsman, 4.2%. I still want Sarah Palin, 4.2% (she has not declared as a candidate). Newt Gingrich, 3.6%. Rick Santorum, 3.6%.

Former Utah Governor Jon Huntsman Jr. used his opposition to ethanol, corn and soybean subsidies to explain why he is not competing in Iowa. "I probably won't be spending a lot of time in Iowa. I understand how the politics work there," Huntsman said in June, according to the Times.

More than three-quarters of likely GOP voters in Iowa reported that they would consider supporting a candidate who favored eliminating ethanol subsidies, the report said. Several factors are likely behind this shift, it added. In the short term, voters have recently become heavily focused on the nation's spending, debt and deficit, and some who once supported such subsidies say the nation can simply no longer afford them.

"The issues that are at the top of the minds of average Iowa caucus-goers, much like most Americans, are issues relating to the economy, creating private-sector jobs and stopping unsustainable spending out of Washington, even those Iowans who make their living off the farm economy," said state GOP Chairman Matt Strawn, the son and grandson of corn and soybean farmers. "They're just as concerned as anyone about the long-term, looming financial issues."

But longer-term trends are also behind the move, said Bruce Babcock, a professor of economics and director of the Center for Agricultural and Rural Development at Iowa State University. "Ethanol doesn't need the subsidies it had in the past," he told the newspaper. "The economics have changed."

The ethanol industry began when oil was cheap, and gasoline producers needed an incentive to blend their fuel with ethanol. But the industry has matured, and today's high oil prices make adding ethanol profitable even without the subsidy. Additionally, MTBE, an additive that competed with ethanol, fell from favor in the last decade because it can contaminate groundwater. Also, Iowans are leaving rural farming areas for cities, so they have less connection with agriculture than they once did.

The opposition to the subsidies has created strange bedfellows, the report said, among them anti-tax groups, environmentalists and those concerned with rising food prices. Even many farmers favor ending the ethanol subsidies, if those for oil are curtailed as well, said the report.