Jan. 5 (Bloomberg) -- Allegiance to ethanol, once required for political success in rural states, has faded in importance as some candidates skeptical about biofuel subsidies fared better than supporters in the Iowa caucuses.
Staunch ethanol opponent Ron Paul took second in rural counties. Rick Santorum, who won the vote in farm country, relied on support from religious conservatives -- although support for biofuels helped. Mitt Romney, who has criticized long-term government subsidies for the fuel, carried the entire state. Newt Gingrich consulted for an industry group and had the highest rating on farm policy from the Iowa Corn Growers Association. He took fourth.
Ethanol’s growth, and rising acceptance that it no longer needs tax credits and trade protection, reduces the political importance of a fuel that once stood as a litmus test for candidates, a lesson that may reverberate in other states, according to Chuck Hassebrook, the executive director of the Center for Rural Affairs, an advocacy and development group based in Lyons, Nebraska. That’s a change from 2008, when Republican nominee John McCain didn’t actively compete in the state, partly because his ethanol opposition was considered a sure-fire loser.
Biofuels are “a little less potent of a symbol today,” Hassebrook said. “Ethanol is established, and corn prices are very strong.”
With little opposition in Congress, a 45-cent-a-gallon tax credit for ethanol blenders expired Dec. 31, as did a 54-cent-a-gallon tariff on imports. A requirement for 15 billion gallons of production by 2015, up from 13.2 billion this year, remains.
Ethanol-driven prosperity in the rural Midwest, combined with tougher times elsewhere, has made biofuels a difficult balancing act for politicians who want to win key swing states from Minnesota and Wisconsin to Indiana and Ohio without running into trouble with other voters, said Shawn McCambridge, senior grain analyst for Jefferies Bache Commodities Inc. in Chicago.
“It’s a real tightrope to walk politically,” he said.
One in six Iowa jobs is tied to agriculture, according to a 2009 study by Dan Otto, an Iowa State University economist. Corn prices that averaged 26 percent more in 2011 than in 2008, the previous record year, have pushed farmland values in the Hawkeye State to more than triple what they were a decade ago.
Iowa’s unemployment rate of 5.7 percent compares with the nationwide rate of 8.6 percent. The state’s attitude toward biofuels also differs from parts of the country where they have been linked to everything from higher food prices to global warming.
Ethanol’s strength allows voters tied to the farm economy to worry less about biofuels and look more at other issues, said Becky Beach, a Republican operative in Iowa who helped George H. W. Bush and George W. Bush win the state’s caucuses in the 1980s and 1990s.
“The fact that we don’t have any farm crisis or dramatic, pressing needs is a good thing for Iowa,” said Beach, who caucused for Romney.
Santorum, who opposed biofuels incentives in Congress, won rural areas this year because he’s socially conservative and visited all 99 of the state’s counties in a pickup truck, she said. The former U.S. senator from Pennsylvania garnered 28 percent of caucus votes in farm country, according to an analysis by the Center for Rural Strategies, a research group. Santorum, who left Congress in 2007, says he now considers ethanol a viable source of energy. Statewide, he came eight votes from topping Romney.
Turnout for Romney
Romney, who ran third in rural counties with 19.6 percent, was able to win the overall caucus vote because of higher turnout and support in urban areas, the Whitesburg, Kentucky-based center said.
U.S. Representative Ron Paul of Texas, an ethanol opponent, took 20.1 percent of the rural vote, beating Romney based on his calls to significantly shrink the federal government and expand personal liberties. In contrast, former U.S. House Speaker Newt Gingrich, whose consulting firm has earned $575,000 since 2009 for advising Growth Energy, an ethanol-industry lobbying group, took a distant fourth.
Gingrich’s retail politicking was weak, and a blast of negative ads from other candidates overwhelmed his support, Beach said.
Ethanol’s lessened political importance doesn’t make it irrelevant, and outspoken criticism of the biofuel can still hurt candidates among rural voters, said Dee Davis, the president of the Center for Rural Strategies. Texas Governor Rick Perry, who in 2008 asked the Environmental Protection Agency to relax federal ethanol-use requirements to keep corn prices down, took fifth in the overall vote.
The Corn Belt has too much invested in the fuel not to care, said Jerrod Kitt, an analyst at Linn Group in Chicago.
“You’ve definitely seen erosion in broad-based support, but in terms of the Midwest, you’re always going to have support,” said Kitt, an Iowa native. “Some of these plants cost $100 to $150 million. There’s a lot of money tied up” in ethanol distilleries, he said.
Still, a spotty record on biofuels isn’t the deal breaker it once was, Davis said. Social positions, fiscal conservatism or plain, principled stances can make up for skepticism toward subsidies. Sometimes, a candidate can attract rural support simply by visiting a small town -- a lesson President Barack Obama and his eventual opponent may want to heed in a tight election in November, he said.
“The Farm Belt went for Santorum because he showed up,” said Davis. “You can’t just see someone dress up in jeans and state a policy that fits on television.”
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