In the agricultural economy, declining commodity prices continue to be a concern. In corn- and soybean-rich southwest Iowa, this is of particular concern.

There is a proposed policy both producers and economic development leaders should rally around this session to support value-added agriculture in both rural and urban communities throughout the state – a tax credit to incentivize the development of renewable biochemical production facilities.

With uncertainty on the Renewable Fuel Standard, alternative value-added bioproducts are important for further growth of the agriculture and biomanufacturing industries within Iowa.

The biofuels industry has been successful for Iowa. However, the biochemical market is composed of hundreds of distinct products including materials, consumer goods, nutraceuticals, agricultural chemicals, therapeutics, specialty chemicals, polymers, etc. Overall, the potential for biochemical may be greater because product value per pound is higher for chemicals than for fuels.

Primary data recently made available supports the potential for this tax credit incentive. A recent “white paper” released by the Iowa Biotechnology Association and the Cultivation Corridor and written by Dr. Dermot Hayes of Iowa State University, shows this tax credit incentive for business surrounding a plentiful raw material makes good policy.

We have shown in our state how the government investment in such policy is a worthwhile investment. Iowa’s ethanol experiment in ethanol economic incentives serves as an example.

Dr. Hayes’ document shows that Iowa’s incentives to develop its ethanol industry yielded dividends.

The document shows that Iowa’s incentives to develop its ethanol industry were repaid within one to two years.

The Hayes report uses our successful growth of the ethanol industry as an example to show that tax credits can stimulate enough additional economic activity to offset the taxes lost due to the credit. The circumstances under which ethanol policy succeeded were as follows and would apply to a tax credit incentivizing renewable biochemicals:

• Iowa had a competitive advantage in the provision of raw materials.

• The industry was mobile and chose Iowa over other Midwest states.

• Other states in a similar position were not offering the same incentive.

• The incentive was one time in nature and expired once industry had matured.

• The industry had the potential to grow into a significant economic force before the market was saturated.

According to the Hayes report, a typical commercial-scale facility incentivized through this tax credit will employ 50 to 100 workers.

These workers will be highly skilled and well paid. Industries that require specialized workers often benefit from economics of agglomeration.

Workers are attracted to areas where they have a choice of companies and companies are attracted to areas where they have a choice of workers.

Iowa has more than ethanol facilities in both rural and urban communities that could support additional development with this tax credit. But this industry needs to attract large sources of capital due to the complexity and scale of the plants.

Owners of this capital are more likely to invest if they perceive that the industry is welcome and it can benefit from modest tax credits.

As the nation’s second leading producer of biomass materials, we are well positioned to leverage the benefits attached to this tax credit.

The ag community should encourage its elected representatives in Des Moines to pass this innovative economic-development policy to support these opportunities for value-added agriculture in our state.

Bob Mundt,


Council Bluffs Area Chamber of Commerce/Growth Alliance.

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