Ethanol Pushers

There's just one problem: Though his crop sustains countless snack-happy Americans (and farmers like him feed millions of cows), it can't deliver enough profit to feed his family.

In recent years, the price for finished corn products — soft drinks, chips and breakfast cereals — has gone up. But the price for corn itself has gone down. Millard remembers that in 1972, he was getting $3 a bushel. The price slid closer to $2 in the 1980s. Recently, he says, it dipped as low as "$1.70-something."

He needs $3 a bushel. "So if the market will only give us two," he says, "we've got to have a dollar someplace else."

That's where the rest of us start picking up the tab.

Taxpayers have subsidized corn production since 1973, when the United States government started doling out direct payments to farmers. Between 1995 and 2004, corn farmers in Kansas and Missouri banked more than $2.6 billion in federal aid. Paying farmers to keep growing has resulted in an overabundance of corn that even the world's most obese nation doesn't have the appetite to consume.

What to do with all that excess?

Politicians came up with a timely solution while the country was reeling from the energy crisis of the 1970s: spin cornstarch into engine fuel, and we could drive off into the sunset of energy independence. The government has subsidized ethanol production ever since.

Late last year, the federal government passed a law requiring 7.5 billion gallons of renewable fuels to enter the nation's fuel supply by 2012 — a goal that would barely replace 5 percent of the 140 billion gallons of gas Americans will burn this year.

Congress congratulated itself for passing the supposedly landmark legislation, but grain-belt politicians and the powerful agribusiness lobby had been pushing corn-based fuel for decades. Crowned "Senator Ethanol" by his own press office, Kansas Sen. Bob Dole stirred up federal enthusiasm for ethanol subsidies starting in the late 1970s. Also pushing for corn-fuel incentives, Archer Daniels Midland — one of the largest agriculture corporations in the world, dominating the purchase, transportation, processing and distribution of corn- and soybean-based ingredients in the United States and abroad — put sizable financial muscle behind the effort.

ADM is the country's leading refiner of ethanol. This year, it is expected to produce approximately 1 billion gallons (more than that of the next five highest producers combined). Since 2000, ADM has contributed $3 million to federal legislators. In the past decade, it's sent checks to Missouri's U.S. Sens. Kit Bond (totaling $9,000) and Jim Talent ($11,000) as well as Kansas Sens. Sam Brownback ($5,000) and Pat Roberts ($7,500), all Republicans.

The link between ethanol interests and politicians on both sides of the aisle is only growing stronger. In one of the most closely watched Senate races in the country, Democrat Claire McCaskill and Republican Jim Talent have both touted their fondness for ethanol — and their support for hefty public subsidies — in their tours through rural Missouri.

Such bipartisan gushing has driven the production boom. As Ashley McCarty, policy director for the Missouri Corn Growers Association, points out, "Government programs have been absolutely crucial in helping the ethanol industry find solid ground."

That's because the subsidies don't end with the mountain of grain.

Government subsidies have also translated into billions of dollars for ethanol manufacturers.

For nearly 25 years, manufacturers took advantage of a hearty tax exemption of 52 cents for every gallon of ethanol they produced. The tax break cost the federal government somewhere between $7.5 to $11 billion between 1979 and 2000, according to the General Accounting Office. The feds knocked the credit down to 51 cents per gallon in 2004.

An additional tax credit of 10 cents a gallon goes to plants that cook up fewer than 60 million gallons a year — such as all of the operational plants in Missouri and Kansas.

Also pouring out of federal coffers this year: $85 million in loans and grants that will aid new ethanol ventures, thanks to the Energy Policy Act.

But Millard says those federal subsidies are small beans. "What really helped get this industry off the ground was some very, very positive leadership from the state," he says.

In 1999, Missouri began granting ethanol plant investors a tax credit of up to $15,000 or 50 percent of their investment in a new plant. That program has shelled out approximately $10.5 million since its inception, according to the Missouri Department of Agriculture.

Once a plant is up and running, the public money keeps flowing. Since 1988, when Kansas started a fund to support ethanol plants, the Sunflower State has doled out nearly $53 million in incentives for approximately 650 million gallons of fuel production. Since Missouri began a similar program in 2000, the state has contributed $32 million to the three plants operating in the Show-Me State.

It takes more public money to get the corn fuel into gas tanks. Though blends of 10-percent ethanol are compatible with current pumps, higher blends — such as the hyped 85-percent-ethanol fuel known as E85 — require special storage tanks and on-site piping that mean $10,000 to as much as $30,000 in retrofitting costs for a typical station, according to the U.S. Department of Energy. Less than 1 percent of the nation's nearly 175,000 fuel retailers now sell E85 (57 are in Missouri, 13 in Kansas). Federal and state governments are willing to help foot the bill to change that, though — between Uncle Sam and the state, Kansas E85 retailers get up to 70 percent of that cost reimbursed.