Increased Use of Ethanol Would Be a Bonanza for Corn Growers

Production of ethanol, a clean-burning fuel made from corn, could triple in the 1990s, but only if Congress offers tax breaks and other benefits, a report says.

Escalation of ethanol production would be good news to corn growers, who would see bushel prices climb, and to the Agriculture Department, which could then spend less on farm subsidies.

But congressional investigators also note some possible negatives: lower soybean prices, higher prices for cattle feed and increased costs to consumers who purchase corn in grocery stores.

“Expanded use of ethanol fuels would have mixed effects on various sectors of American agriculture,” the General Accounting Office said in the report, which was released last week. The GAO is the investigative arm of Congress.

The fuel has great appeal among farm-state lawmakers, especially this year as Congress considers new limits on automobile pollution.

Lawmakers tout ethanol as an environmentalist’s dream and a farmer’s bonanza. When gasoline is blended with ethanol, harmful auto emissions are reduced. If the ethanol market picks up, growers would have another use for their corn.

In 1988, nearly 1 billion gallons of ethanol were produced. The ethanol industry told the GAO it could triple output if Congress dangles some incentives.

For example, there is a 9-cent tax on each gallon of motor fuel, but the levy for gasoline made with ethanol is only 3 cents. The industry would like to keep the 6-cent exemption and get a law passed that would order the use of alternative fuels.

If production is tripled, the industry would enjoy an average annual tax break of $813 million through 1997, the GAO said.

While that might hurt the Treasury, the GAO said the greater demand for corn would reduce the need to subsidize farmers, saving the government an average of $1.42 billion a year.