HARVESTING CASH The Ethanol Factor

Corn Farms Prosper, but Subsidies Still Flow

9/6/2007Iowa Falls, IowaA sign outside an Iowa Falls feed mall advertises the highest prices bid for corn in a decade.
9/6/2007Iowa Falls, IowaA sign outside an Iowa Falls feed mall advertises the highest prices bid for corn in a decade. (Dan Morgan - Twp - The Washington Post)
By Dan Morgan
Special to The Washington Post
Friday, September 28, 2007

RADCLIFFE, Iowa -- Corn farmer Jim Handsaker has found a slew of ways to ride the heartland boom in biofuels that is reshaping the economy of rural Iowa.

He sold some of his 2006 crop this year for more than $4 a bushel, the highest price in a decade. His stake in two nearby ethanol plants brought in several thousand dollars more in dividends. Meanwhile, soaring farmland prices have pushed the value of the 400 acres he owns to around $2 million.

Even so, come October he will get a subsidy check from the government, part of a $1.6 billion installment that the U.S. Department of Agriculture will send to corn farmers.

Those annual automatic payments to Handsaker and thousands of other prospering corn growers have long been controversial. But coming at a time when taxpayers are already subsidizing the ethanol industry to the tune of $3 billion a year, the double-barreled support system for those who grow corn and those who turn it into fuel has begun to draw fire in Congress.

"Federal farm subsidies are already narrowly focused on certain crops and are excessive," said Sen. Richard G. Lugar (R-Ind.), a farmer and former chairman of the Senate agriculture committee. "They become ridiculous given the exploding possibilities to grow crops for biofuels production."

So far, Congress has shown little inclination to adjust the subsidies to account for the new energy-driven rural economy.

A House-passed farm bill would give corn growers $10.5 billion over the next five years, even if prices stay high. These "direct payments," a kind of annual allowance, are set by formula and go out automatically, regardless of prices, profits, yields or weather.

At the same time, a Senate-approved energy bill would double the federal requirement for the use of ethanol from corn -- a move that should further buttress corn prices.

Handsaker, a Republican who keeps a framed picture of President and Mrs. Bush in his office, argues that such farm subsidies help keep agricultural land in the hands of family farmers and away from corporate monopolies.

Handsaker is not banking on the ethanol boom lasting. "We've all been down the road of price plateaus," he said.

But he acknowledges that justifying the payments is not easy in the midst of an energy renaissance in the heartland. Country roads are dotted with signs advertising "ethanol corn" -- genetically engineered seeds with the high starch content ideal for making 200-proof, high-octane ethanol.

Just weeks before the October harvest, Hardin County, Handsaker's home in central Iowa, was a sea of corn rolling southwest from Iowa Falls. Handsaker once grew a mix of corn and soybeans on the farmland he and his brothers own or rent. "Now we're 100 percent corn," he said.

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