April 28, 2010
President to Tour Ethanol Plant, Farm (DTN)
President Barack Obama's latest Main Street Tour of rural America comes at a time when biodiesel plants have shut down, the future of the U.S. ethanol industry hangs in the balance, jobs are hard to come by and credit availability is sparse.
When Obama makes stops in Illinois, Iowa and Missouri Wednesday, however, White House officials said the president will hammer home the importance of Wall Street reform and its connection to rural communities, and focus on what his administration has already done to help rural areas.
The administration touted successes in rural America in a new Council of Economic Advisers report released Monday. However, White House officials said on Monday the president will not be unveiling new programs targeted for rural communities.
Those accomplishments include an expansion of the Renewable Fuel Standard that creates demand for biofuels, health care reform for its cost saving, rural broadband access initiatives and policies designed to bolster export of U.S. farm commodities.
However, when asked about specific rural issues such as the pending approval of E15, climate change legislation's possible effects on rural America and job losses from biodiesel plant closures as a result of the expiration of the $1 blenders credit, White House officials deflected attention to what the administration has already done.
Christina Romer, chairperson of the President's Council of Economic Advisers, said during a press conference that the 2009 Recovery Act helps rural communities by investing about $90 billion in clean energy, which is largely produced in rural America.
In addition, Romer reminded reporters the Obama administration inherited the recession and the administration concentrated on turning the economic tide in the past year, which including making credit more accessible.
"The entire country suffered from a bad recession," she said. "There was a restriction of credit. We have seen dramatic improvements of credit flowing to small rural businesses."
For the past 18 months, however, ethanol companies that operate primarily in the Corn Belt have struggled to find credit.
And cellulosic-ethanol developers have expressed concern that a federal loan guarantee program designed to help jumpstart advanced biofuels production and other industries hasn't worked.
And the 45-cent volumetric ethanol excise tax credit, or the blenders' tax credit, is set to expire at the end of 2010. Ethanol production by and large, would not be profitable without the credit.
On Wednesday Obama is scheduled to tour Poet LLC's ethanol plant in Macon, Mo., and a local farm. Later he is scheduled to make the administration's case for financial reform during remarks in Quincy, Ill. Then the president will stop in Iowa.
Ethanol advocate Growth Energy's CEO Tom Buis said the president's visit to the Poet plant reinforces the administration's "strong support for ethanol producers and rural America."
The CEA report released Monday provides examples of a wide range of federal programs that help rural communities as well as possible reforms to agriculture programs.
The report said RFS will result in a net farm income of about $13 billion in 2022. The RFS requires the production of 36 billion gallons of renewable fuels by 2022. The report, however, offers no hint as to the administration's position on a possible extension of the ethanol or biodiesel blenders' credits.
As a result of the Recovery Act, the dollar amount of lending in rural areas increased2.5 times from 2008 to 2009.
In addition, the report said the president's proposed fiscal year 2011 budget includes "a number of reforms to existing federal support for the agricultural sector."
The Obama administration wants those programs to "better target" farm payments, the report said, by including more stringent income eligibility requirements to "preclude the wealthiest farmers from receiving payments." Currently, farms with $500,000 or more in sales receive 38 percent of subsidies, although they account for only 4 percent of farms, the report said.
In the administration's proposed budget, after a three-year phase-in, farmers with a farm-adjusted gross income of more than $500,000 or nonfarm AGI of more than $250,000 would no longer be eligible for direct payments, the report said.
The president's budget also proposes reforming the crop insurance program to reduce profits by private companies that supply reinsurance, the report said. According to the report, the crop insurance change is projected to save $8 billion in 10 years.
