Home / News / Business news / End is nigh for ethanol blenders' credit

End is nigh for ethanol blenders' credit

Jeff Caldwell 12/29/2011 @ 10:26am Multimedia Editor for Agriculture.com and Successful Farming magazine.

In June, the U.S. Senate voted toe nd the ethanol blenders' tax credit, a move decried by some ag groups and shrugged off by others.

Now, that tax credit, formally known as the Volumetric Ethanol Excise Tax Credit (VEETC) is slated to end with the end of calendar year 2011. With it will go the 54-cent-per-gallon tariff on imported ethanol. Ethanol industry groups were understandably upset with the decision, while cattle industry groups, namely the National Cattlemens Beef Association (NCBA) called it a "giant step toward leveling the playing field for a bushel of corn."

So, what will happen next?

The short answer is probably not a whole lot, at least in the near future. AgTraderTalk.com market analyst and trader Kevin Penner says though the credit will be gone, the government's mandate will still be in place, so it's not a situation where the industry's corn demand will fall too much.

"I don't think we'll lose much corn demand because there is still a minimum amount that we have to blend. In essence, the demand level is the law of the land," Penner says.

Add to that the fact that VEETC doesn't affect producers as much as it does refiners and retailers. The credit was originally implemented as a way to encourage the construction of ethanol production and infrastructure, says Chris Thorne of Growth Energy, a renewable fuels industry association. That goal's been accomplished, and now the U.S. ethanol market's reached a point of maturity where the production sides's now largely unaffected by it.

"There's still going to be demand for ethanol in the U.S. We're still in a position where we're exporting to Europe and Brazil," Thorne says. "The question isn't really a production question anymore. The blenders' tax credit worked in the sense it was intended to encourage the ramp-up of production in the U.S."

And, that production capacity's been "going like hell" lately, since the break in corn prices in early November, Penner says. Whether ethanol plant bids for corn adjust differently now because of the absence of the VEETC is unknown, but at least for now, the economics for many plants -- when it comes to macro-level factors like this -- are still fairly solid.

"We've seen a break in margins lately, but overall I think the ethanol industry will survive just fine in 2012," Penner says. "What we'll see is pure economics come into the equation."

CancelPost Comment

Corn Ethanol Scam 01/01/2012 @ 6:23pm I am so happy to see this wasteful subsidy end. Next we need to either (1) get the mandate rolled back or (2) get enough cellulosic ethanol to negate the need for corn ethanol. Corn ethanol is one of the most ruthless scams the ag lobby has ever pulled on the American people. No environmental benefit, no economic benefit, most of the profit associated with the government mandated demand ends up in the pockets of the richest farmers and finally, most importantly, corn ethanol is incredible destructive to the environment -- huge negative impacts from excessive fertilizer, pesticide, herbicide, runoff, etc from corn on corn, CRP coming out of conservation and put into production (unfit to farm) etc. Also, corn ethanol tears up engines (especially marine) and pretty much benefits no one except ultra rich Iowa farmers.

Report Abuse Reply

Corn Ethanol Scam 01/01/2012 @ 6:23pm I am so happy to see this wasteful subsidy end. Next we need to either (1) get the mandate rolled back or (2) get enough cellulosic ethanol to negate the need for corn ethanol. Corn ethanol is one of the most ruthless scams the ag lobby has ever pulled on the American people. No environmental benefit, no economic benefit, most of the profit associated with the government mandated demand ends up in the pockets of the richest farmers and finally, most importantly, corn ethanol is incredible destructive to the environment -- huge negative impacts from excessive fertilizer, pesticide, herbicide, runoff, etc from corn on corn, CRP coming out of conservation and put into production (unfit to farm) etc. Also, corn ethanol tears up engines (especially marine) and pretty much benefits no one except ultra rich Iowa farmers.

Report Abuse Reply
MORE FROM JEFF CALDWELL more +

Got the Next Big Ag Tech Idea? Take It to… By: 10/22/2014 @ 2:36pm Do you have the next big ag technology idea? Are you looking for a way to get it started toward the…

'No Major Setbacks' for Harvest… By: 10/22/2014 @ 7:49am After a few showers move through the eastern Plains and northwestern Corn Belt late this week and…

Midharvest Grain Storage Update By: 10/21/2014 @ 1:36pm What sort of shape is your corn crop in as you put it in the bin this fall? How about your…

MEDIA CENTERmore +
This container should display a .swf file. If not, you may need to upgrade your Flash player.
Are We In a Climate Change?