JUNE 17, 2011, 4:38 P.M. ET
Ethanol Vote Barely Alters Biofuel’s Prospects
By SCOTT KILMAN

The vote by the U.S. Senate Thursday to end excise tax breaks for buyers of ethanol is a political blow for the Midwest-centered industry, but by itself it doesn’t much change ethanol’s immediate prospects.

The decades-old tax break, which was already slated to expire at the end of this year, has been surpassed in importance in recent years by federal mandates that require the petroleum industry to annually buy billions of gallons of the corn-derived alcohol and mix it with gasoline.

The mandates, which fanned a Midwest construction boom in the middle of the past decade, prop up the ethanol industry by effectively requiring gasoline retailers to use 12.6 billion gallons of the biofuel this year. The mandate moves to 15 billion gallons in 2015. Ethanol represents more than 9% of the U.S. gasoline market.

Indeed, ethanol critics have argued that it doesn’t make sense for the financially-pressed federal government to continue to give a tax incentive that began in the late 1970s to gasoline retailers for buying a product that the law now requires they buy anyway.

“The impact of the vote is more psychological for the ethanol industry than anything,” said Michael Swanson, an agricultural economist at banking giant Wells Fargo & Co.

Investors in ethanol-related companies seemed to be shrugging off the Senate vote. In late afternoon trading Friday, shares of Archer-Daniels-Midland Co., the Decatur, Ill., commodity processing concern, were up 2%.

A report issued Friday by Credit Suisse’s agribusiness equities analysts concludes that any subsidy cuts wouldn’t materially reduce demand for corn-derived ethanol over the next two years “as long as the debate in the legislature continues to leave the very generous demand mandates… untouched.”

Dan Basse, president of AgResource Co., a Chicago commodity forecasting concern, said Friday that the Senate vote didn’t prompt him to change his forecast for the ethanol industry to consume five billion bushels of corn, or 40% of the entire corn crop harvested in the U.S. last fall.

A bipartisan majority of the Senate voted Thursday to repeal the 45 cent excise tax credit that is collected by gasoline blenders on every gallon of ethanol they mix with motor fuel. The tax break for blenders, which is designed to increase demand for ethanol, totals about $6 billion annually.

The vote is widely seen as symbolic because it is attached to legislation that isn’t expected to make it out of Congress. But the 73-27 vote signals that ethanol isn’t the sacred cow in Washington that it once was, thanks to growing concerns about the budget deficit as well as a backlash over rising grain costs.

Indeed, even the farm lobby is split over federal incentives for ethanol. Livestock producers became upset when the rapidly growing ethanol industry suddenly began to compete for the corn they need for feeding their animals.

The Senate vote “sends a pretty strong message to the ethanol industry that it is time for them to compete on a level playing field,” said Dave Warner, spokesman for the National Pork Producers Council, a trade group representing hog producers.

Meat giant Tyson Foods Inc., which has blamed the federal government’s ethanol policy for increasing its costs of feeding chickens, called the Senate vote “an important first step toward restoring balance to our food and fuel policies.”

Some ethanol executives have been resigned to losing the 45-cent-a-gallon tax credit since late last year when they were able to win enough votes to extend its life by just one year. Todd Becker, chief executive of Green Plains Renewable Energy Inc., an Omaha, Neb., ethanol producer, said he was disappointed by the Senate vote because an abrupt end to the tax credit would “send the wrong message” to investors.

Still, he said Green Plains can do well without it. “It’s the mandate that is crucial,” he said.

The ethanol lobby is having a hard time letting go of the tax credit, though. It is pushing legislation that would, among other things, tie the size of the tax credit to the price of oil for three years, and shift some money into federal incentives for the building of retail fuel pumps able to dispense higher levels of ethanol blends.

Some food executives want to rein in the ethanol mandates, but there is little agreement among the critics of federal ethanol policy about how to do that. Cargill Inc., the closely held commodity processing giant based in suburban Minneapolis, favors creating some sort of circuit breaker that would temporarily ease the federal mandates when corn supplies are unusually tight, as they are expected to be late this summer.

But Cargill, which itself makes ethanol, hasn’t proposed a formula for when to reduce mandates, or by how much.

Write to Scott Kilman at scott.kilman@wsj.com

KINDLE.

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http://seekingalpha.com/article/213891-apple-s-strategy-new-insights?source=feed

http://www.twitter.com/ceoSteveJobs/status/17458900772

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I tried in my site, it doesn’t work. I might already have modified config.php before or those are not fit for WordPress 3.0.

Can u take a look (Preview) on ur site? Let me know.

http://codex.wordpress.org/Installing_Multiple_Blogs