USDA Clarifies Ethanol Plant Loan Comments

Cindy Zimmerman

Comments made to the press last week by Secretary of Agriculture Ed Schafer regarding the possibility of USDA loans to ethanol plants that have been hurt by commodity market speculation this year have caused quite a stir. USDA has been working to get the word out this week to clarify that this is not any kind of a “bail out” for ethanol plants, nor is it a new program that was created to help plants that made bad investments.

World Food Prize Ed SchaferSchafer said the government could provide up to $25 million per company to refinance through a “guaranteed loan-type program for operating capital.” These types of loans are available through the Rural Development’s existing Business and Industry (B&I) Loan Guarantee Program. Under that program, the loan must be secured by a private lending agency – USDA does not make a direct loan.

Regardless, livestock industry groups are up in arms about the possibility of helping ethanol plants in trouble. Eight major livestock organization leaders wrote to the secretary this week protesting what they view as preferential treatment for the ethanol plants. “Many of our producer and processor members also took long positions on corn and soybeans and are paying above-market rates right now,” they wrote. “We in animal agriculture are particularly concerned that you would consider adding one more level of support for the corn-based ethanol industry.”

However, Secretary Schafer said this week that ethanol plants should be treated no differently than other agricultural companies that can take advantage of the existing loan guarantee program.

Ethanol, Government, News