US Ethanol subsidy has expired

ADM, VLO, PEIX, GPRE, CZZ, RDS-A

After 30 yrs of payments to farmers and blenders, the US federal subsidy on Corn-based Ethanol expired when Congress adjourned last week without taking any action to renew it, as the US Congress has accomplished something by doing what it does bet nothing. The subsidy cost US taxpayers about US$6-B annually.

The lack of Congressional action ends the 0.45/gal blender’s credit on US-produced Ethanol and the 0.54/gal tariff on imported Ethanol.

US Ethanol producers Archer Daniels Midland Co. (NYSE:ADM), Valero Energy Corp. (NYSE:VLO), Pacific Ethanol Inc. (NASDAQ:PEIX), and Green Plains Renewable Energy Inc. (NASDAQ:GPRE) are not likely to feel any appreciable pain from the end of the subsidies.

Brazilian sugar cane based Ethanol maker Cosan Ltd. (NYSE:CZZ) and its partner, Royal Dutch Shell plc (NYSE: RDS-A) have also been making a profit exporting Ethanol to the US in spite of the tariff.

The end of the subsidy does not end the US federal mandate on the use of alternative fuels for transportation.

A mandate adopted by the US Congress in Y 2007 that calls for 200-M gal of alternative fuels to blended with Gasoline in Y 2012. So, almost every gallon will come from Ethanol, and the producers do not need a subsidy on top of a mandate to make a profit.

Paul A. Ebeling, Jnr.

Paul A. Ebeling, Jnr

Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster’s Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.

Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.

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Posted by Shayne Heffernan on Jan 2nd, 2012and filed underAgriculture, Corn, Latest News, Paul Ebeling.You can follow any responses to this entry through theRSS 2.0Responses are currently closed, but you can trackback from your own site.