One of the principal objectives of the federal biomass program is to improve the lot of farmers and rural communities. History teaches us that simply expanding demand for plant matter will not automatically benefit the cultivators of that plant matter. As farmers are aware more than any­one, expanded markets in the past have not resulted in increased net income to the farmer. This is because, as John F. Kennedy once observed, "The farmer is the only man in our economy who buys everything retail, sells everything he sells wholesale and pays the freight both ways."4

In 1910, of every dollar generated by agriculture, the farmer received 41^. By 1990, the farmer’s share had dwindled by more than 75%, to just 9^. And today it is closer to 7tf. Yet this reduction in the farmer’s income has not resulted in a reduction in the retail prices of the products made from the farmer’s raw materials. The price of a pound of corn flakes has gone up some 50% in the last 15 yr while the price of a pound of corn has gone down.5 What this means is that for the farmer to significantly benefit from federal biomass policies, these policies must enable the farmer to gain an income from the value-added steps in converting the commodity crop into a whole­sale and retail product.

I serve on a congressionally created committee that advises the Secre­taries of Energy and Agriculture on biomass R&D efforts. In 2002, the Bio­mass R&D Technical Advisory Committee delivered its first annual report, which acknowledged, "Expanding the use of biomass for non-food and feed purposes will benefit farmers and rural areas only indirectly and modestly. A more significant development would occur if farmers them­selves were able to produce the biofuels or bioproducts, either on the farm or as owners in a local production plant."6

Consider the emergence of bioethanol as an instructive example. The federal excise exemption for ethanol plus Clean Air Act regulations has created a 2.5 billion gal/yr ethanol industry. Evidence from Minnesota and Missouri indicates that this has increased the price that farmers are getting for their corn from local ethanol plants by 5-10^/bushel. 7

However, if farmers own the ethanol plant, they receive the additional price that results from increased markets plus they receive a part of the profit generated at the manufacturing level. Information on returns on ethanol investments is closely guarded and the returns vary dramatically from year to year and from plant to plant. Nevertheless, it is not unusual for the dividend in an average year to be 25-50^/bushel. One unreleased study of the farmer-owned Minnesota Corn Processors ethanol plant found that farmer-investors earned about 18% annually over the 20-yr life of the plant as a cooperative.