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More expensive ethanol?

Some in the ethanol industry have been saying they can survive without the federal 45 cent-a-gallon tax credit that expires this year. The Renewable Fuel Standard 2 still requires the blenders to use about 13 billion gallons of starch-based ethanol this year.

But in recent years the industry has expanded slightly ahead of the RFS2 mandate and still found markets because the tax credit and fuel markets made ethanol cheaper than gasoline.

But the loss of the credit, known as the volumetric ethanol excise tax credit (VEETC) could be challenging, Ron Lamberty, Senior Vice President for the American Coalition for Ethanol said at the group’s annual meeting in Des Moines, Iowa, Tuesday.

Lamberty showed a slide comparing recent spot prices in one market for unleaded gasoline and  for blends of ethanol. The total product cost (including state and federal taxes) was $3.2315 per gallon for unleaded and $3.1902 for 10% ethanol (E10).  Take away the 4 ½ cent savings from VEETC in E10, and the price of E10 is slightly higher at $3.2352 per gallon.

“I’m positive life is going to become very interesting without VEETC under these conditions,” Lamberty said.

The value of ethanol as an octane enhancer for fuels could become more important, he said.

And marketing the coproduct of distillers grains for livestock feed and other uses may become more significant.

“Maybe the day will come when we all make livestock feed products and sell the ethanol as a co-product, I don’t know,” Lamberty said.

Right now, ethanol exports are an escape valve for an oversupply of U.S. ethanol, according to another speaker, Chad Martin, CEO of Eco-Energy, Inc., a Tennessee-based marketer of biofuels.

The U.S. is on track to export 900 million gallons of ethanol this year, he said; Production this year is expected to reach 13.9 billion gallons and “900 million gallons would have had to find a home in the U.S,” he said. The top five importers of U.S. ethanol are Brazil, Canada, the Netherlands, the United Arab Emirates and the United Kingdom.

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