Producers' letter urges full-funding of CCC program

By | September 01, 2002
Fifty-one bioenergy and ethanol plant managers signed a letter last month that went to the Senate Appropriations Subcommittee. The letter rebuked members of the subcommittee for not fully funding an ethanol production incentive program in the 2003 Agriculture Appropriations bill.

The letter urges the full Senate to leave the funding for the Commodity Credit Corporation's (CCC) Bioenergy Program at its full amount of $150 million. The agriculture subcommittee passed the $74 billion appropriations bill a few months ago, only providing $50 million for the CCC Bioenergy Program. The program makes cash payments to companies that increase their purchases of crops to expand production of ethanol, biodiesel or other biofuels.

The following is a partial transcription of the letter:

"The need for a strong, domestic agriculture sector has never been greater and we commend you for your leadership through many years of difficult economic times. Specifically, we appreciate the years of contribution and support you have provided to the renewable fuels industry, including the recent appropriation of $50 million to the newly legislated Commodity Credit Corporation (CCC) Bioenergy Program.

In as much as we appreciate your efforts in these difficult budget times, it appears the need for the program will exceed $50 million. In fiscal year 2003, ,we estimate 19 new ethanol production facilities and several existing facilities will increase eligible production capacity by at least 400 million gallons from more than 150 million bushels of corn. . . The Bioenergy Program is a critical program to new ethanol and biodiesel companies because it allows them to purchase inputs (corn, soybeans, and other agricultural feedstocks) at a discount. Profitability is difficult in the first year of production for any company, and the margins in the first few years of production for new ethanol and biodiesel facilities will be exceedingly tight.

The ethanol and biodiesel industries are two of the sectors of the nation's economy that will contribute to domestic growth and rural economic development. Production facilities across America's countryside serve as local economic engines providing high-paying jobs, capital investment opportunities, increased local tax revenue, and value-added markets for area farmers.

Recently, a study entitled Ethanol and the Local Economy examined the local impact of a 40 (mmgy) ethanol plant. The study found that a new ethanol facility would: Provide a one-time boost of $142 million to the local economy during construction; Expand the local economic base of the community by $110.2 million each year through the direct spending of $56 million; Create 41 full-time jobs at the plant and a total of 694 jobs throughout the entire economy; Increase the local price of corn by an average of 5 to 10 cents per bushel, adding significantly to farm income in the general area surrounding the plant; Increase household income for the community by $19.6 million annually; Boost state and local sales tax receipts by an average of $1.2 million (varies depending on local rates); Provide an average of 13.3 percent annual return on investment over ten years to a farmer who invests $20,000 in an ethanol plant.

Many ethanol and biodiesel plants, including those currently under construction, relied on a fully funded CCC Bioenergy Program as described in the 2002 Farm Bill when planning their financing. The reduction in funding for the program . . . would have a devastating effect on many of these new facilities' financial obligations. This change. . . will likely have a negative effect on the ultimate success of these new facilities.

Therefore, we. . . urge full funding of the CCC Bioenergy Program as designated in the energy title of the 2002 Farm Bill."