Iowa State - Lifting Biofuels Mandate Would Have Modest Impact
Thu Aug 23 17:00:00 CDT 2012 CT
Related Keywords: Agriculture, Energy, Market Fundamentals
CARD Report

Ethanol Makers Still Strong Competitors for Corn

Suspending a federal mandate requiring renewable fuels in the U.S. gasoline supply would probably result in only a modest reduction in corn prices, according to the Center for Agricultural and Rural Development at Iowa State University.

Even as an historic drought sends corn prices to all-time highs, it’s still likely fuel blenders will have incentive to use ethanol, partly because of high gasoline prices, Bruce Babcock, the center’s director, wrote in a recent study.

“A short corn crop promises to heighten concern about food and fuel prices and the ability of livestock farmers and biofuel producers to stay in business,” Babcock said. Still, “ethanol plants will be a strong competitor for corn even without a mandate.”

Under one potential scenario, average corn prices over the coming year would fall to about $7.24 a bushel with a suspension of the mandate, down 7.4% from projected levels under a “flexible” mandate. Under a full mandate, corn may average $9.73.

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