Corn Farms Prosper, but Subsidies Still Flow

On a once quiet highway west of Iowa Falls, a constant stream of tractor-trailers pound the road, hauling corn to the Hawkeye Renewables ethanol refinery and soybeans to Cargill Inc.'s biodiesel plant.

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To celebrate a banner year, Hawkeye founder and chief executive Bruce Rastetter pulled out the stops for his annual midsummer bash. Several hundred politicians, businessmen and farmers mingled at his richly landscaped hilltop estate, and Sen. Charles E. Grassley (R-Iowa) made his entrance in a wagon pulled by Rastetter's team of Percheron draft horses.

"It's a great country," said Rastetter, a Hardin County native who started with a few acres of farmland and a small feed business 20 years ago. He recently pledged $1.75 million to Iowa State University. In addition to his Iowa Falls plant, he operates a second one in a nearby county and has two more under construction.

The boom has helped push shares in Iowa ethanol plants to double or triple the initial price. Bill Couser, a corn grower and cattleman who was a driving force behind a new ethanol plant in neighboring Story County, says a grateful local school bus driver who bought shares "waves and honks every time she drives by."

"That's the secret of this ethanol industry," Couser said. "It's keeping the dollars at home."

In July, Pine Lake Corn Processors, the second Hardin County plant after Hawkeye's, announced profits for the previous eight months of $3,800 a share, more than the $3,250 cost of the initial investment. "It's worked out better than my wildest dreams," said Pine Lake President Larry Meints, a corn grower who pushed for the new plant after becoming fed up with hauling grain to distant elevators.

The new market means corn-rich Hardin County has to import the crop even though it grows 35 million bushels a year. The county can't supply its two ethanol refineries and its thriving pork, beef and poultry industries.

"Things are good here," said Howard B. Wenger, president of Iowa Falls State Bank, who reviews the balance sheets of hundreds of farmers.

He estimates that most farmers earned between $100 and $400 an acre on their 2006 crop after expenses, depending on whether they owned or rented their land. That translates into profits of $100,000 to $400,000 on a 1,000-acre farm. The USDA predicts that net farm income will be $87.1 billion this year, up nearly 50 percent over 2006.

Iowa farmland values are up 18 percent in the past 12 months, according to Federal Reserve Board surveys, making millionaires on paper out of any farmers owning 200 acres free and clear.

The rural prosperity is due in large measure to billions of dollars in federal subsidies and incentives for corn-based energy. These include a 51-cent tax credit that gasoline manufacturers get on every gallon of ethanol they mix with their blends, and more than $500 million in federal cash to ethanol refiners between 2001 and 2006.

In 2005, Congress required the use of at least 7.5 billion gallons of ethanol a year by 2012. Then in 2006 came new demand for ethanol as a pollution-curbing additive, along with a jump in gasoline prices that made the corn-based fuel competitive.