First Generation Ethanol (Food for Fuel) – Headwinds Coming?
Congressional Republicans are working to repeal, or refuse to renew, the tax credit on domestically produced ethanol. It has come to their attention that, in addition to the requirement that producers use minimum levels of ethanol, plus the various benefits accruing to larger growers, the product receives about $5.7 billion/year via the tax credit. While a repeal looks unlikely, a significant cutback seems possible in 2012, which could accompany a reduced import tariff. Today, sugar based ethanol, usually significantly cheaper than corn based product, is actually more expensive to produce. The result would probably be marginally lower use of ethanol in transportation fuels (lower price for corn?), and somewhat more demand for ‘conventional’ refined gasoline.