Farmers worried about ethanol subsidy cuts

The overwhelming U.S. senate vote last week to end massive annual subsidies to the ethanol industry wasn't the final word on the issue, but it did show the program is in peril. The prospect is not going over well in the heartland of America, either.

CBS News correspondent Cynthia Bowers reports that farmers like Illinois corn farmer Paul Taylor says he was caught off guard by the Senate vote to cut $6 billion in ethanol subsidies.

"I think it's a blow to American corn farmers," Taylor says.

The 45-cent per gallon tax break goes to ethanol refiners, but farmers benefit because the increased demand for corn boosts prices.

"The impact it could have on our bottom line is anything we do to reduce demand ultimately reduces our price," Taylor says.

Still, corn prices have doubled since last year, and with this week's vote, the Senate sent the message when it comes to budget cutting that everything is fair game.

In a statement, Republican Senator Tom Coburn said: "Today's vote was a major victory for taxpayers and a positive step toward a serious deficit reduction agreement, which is our only hope of averting a debt crisis."

Just one short decade ago, about 10 percent of America's corn went to ethanol. Now, the number is closer to 40 percent. That's nearly half of all the corn we grow in this country going right into the gas tank.

Oil analyst Phil Flynn says after 30 years of tax payer help, it's time for the ethanol industry to stand on its own.

"This industry is big enough to take the training wheels off. You know, why do they need a 45- to 50-cent a gallon credit just to do their business?" Flynn says.

Michigan Congressman Mike Rogers agrees. He said he applauds the Senate action and expects to see similar action prop up in the House.

"I believe ethanol is a viable fuel source, but it can't continue at the way we are doing it. It may in fact be bankrupting the country. We just can't allow for that to happen," Rogers says.

One alternative that could save billions of dollars is to reduce the subsidy, and farmer Paul Taylor says he could live with that.

"The short answer is: Yes, we're willing to play ball. We want to be at the table. We want to be players. We want to talk about where the ethanol industry is going from this," Taylor says.

For now, farmers are watching this year's crops and wondering about what's next.