The following excerpt is from chapter 3 of Sustainable Ethanol: Biofuels, Biorefineries, Cellulosic Biomass, Flex-Fuel Vehicles, and Sustainable Farming for Energy Independence
Economic and Security Benefits
For too long, the price farmers received for their crops did not even cover the cost of production. Until recently, grain prices remained flat while the cost of other goods steadily rose. Thanks in part to biofuel production, grain prices are finally reaching the point where farmers and rural economies can survive without crop subsidies.
With the rising price of corn in recent years, ethanol tax incentives are offset by lower farm subsidy payments. Under terms of a farm bill in effect from 2002 to 2007, Counter-cyclical payments for U.S. corn crops have gone from over 905 million dollars per year in 2005 to nothing in 2007 (USDA forecast).[i] Counter-cyclical payments are based on market prices. The price of corn is finally above the level that triggers counter-cyclical payments, thanks in large part to demand from ethanol producers.
See chapter 3 of Sustainable Ethanol for the following additional topics:
Economic Impact of Biorefineries
Tax Incentives for Ethanol and Oil
Growing Oil Imports
The Hidden Cost of Imported Oil
Figure 3-1. Estimated Revenue Loss from Tax Incentives for Petroleum and Ethanol
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[i]. USDA Economic Research Service, Farm Income and Costs: 2007 Farm Sector Income Forecast, February 14, 2007, http://www.ers.usda.gov/; USDA, “Direct & Counter-cyclical Program,” Farm Bill Forum Comment Summary & Background, http://www.usda.gov/.