With the start of the new year, the US Legislature did not renew the 45-cent-per-gallon tax incentive for producing ethanol-blended gasoline or the 54-cent-per-gallon tax on foreign ethanol imports. The incentive cost taxpayers about $6B per year. This ends thirty some odd years of government support for the biofuels industry.
The real beneficiary could be Brazil’s sugarcane/ethanol industry. UNICA, the Brazilian sugarcane industry association, issued a press release titled “Time for the world’s top two ethanol producers, the United States and Brazil, to lead a global effort for increased production and free, unobstructed trade for biofuels.” According to Leticia Phillips of UNICA, “This means that in 2012, the world’s largest fuel consuming market (US) will be open to imports of less costly and more efficient ethanol, including sugarcane ethanol produced in Brazil.”
It will be interesting to see how the US biofuels industry fares in 2012 and what the change in policy will mean to corn prices.