July 8, 2011, 12:01 a.m. EDT
Ethanol aid end won’t hurt corn for long
By
Myra P. Saefong, MarketWatch
SAN FRANCISCO (MarketWatch) — Corn prices have dropped around 15% since mid-June, when the U.S. Senate voted to end two tax breaks for the ethanol industry, and at first glance, the move makes sense — just don’t expect it to last for long.
After all, the federal mandate for ethanol in vehicle fuel is still in effect and corn remains the main feedstock for producing ethanol in the United States.
“Ethanol has been the real inflator in corn prices, of this I have no doubt,” said Christopher Ecclestone, a strategist at Hallgarten & Company LLC.
U.S. energy production on the rise.
Energy production in America is on the rise, which is positively affecting the U.S. chemical industry.
Corn prices have clearly taken a dive since June 16, when the Senate voted to put an end to a 45-cent-a-gallon subsidy for ethanol blenders, known as the Volumetric Ethanol Excise Tax Credit, and a 54-cent-a-gallon tariff on imported ethanol.
Read about the Senate vote.
Corn futures have recently traded around $6.15 a bushel on the Chicago Board of Trade, down from about $7.26 on June 25.
For now, the House hasn’t passed a bill to end the ethanol subsidy, but the subsidy is poised to expire at the end of this year.
Ecclestone believes it would be a “no-brainer action in these days of budget deficits” to cut the subsidies.
http://www.marketwatch.com/story/ethanol-aid-end-wont-hurt-corn-for-long-2011-07-08