Can the ethanol industry survive when the tax credit goes away?

This seems to be the question on everyone’s mind, and the question that really needs to be asked is not whether ethanol will survive but what will it look like after the so-called tax credit apocalypse has come and gone.

The ethanol industry is if nothing else extremely resilient, remember ethanol has been used to fuel motor vehicles since the days of Henry Ford. The industry has certainly had its share of ups & downs, and let’s face it, more downs then ups That said, things are a little different now, a lot of money has been invested in building ethanol production and distribution infrastructure. All this development has also created a lot of jobs, especially in rural areas where there aren’t a lot of good paying jobs available, so there exists more support for ethanol then we’re lead to believe. The other side of the coin is that gasoline has to use an oxygenated blending stock to meet federal and state RFG requirements, and ethanol meets that requirement.

Now from what I’ve heard about the ‘compromise’ is that the tariff on imported ethanol will be abolished, that means that our high priced ethanol will have to compete against cheaper sugar-cane produced ethanol. This on the surface is good for competition, and will help to lower the price of ethanol in this country. With that, the price of corn should go down as well. And as we all know competition will weed out the weak, and the strong shall survive. By that we can expect that smaller less efficient ethanol producers will start to go under, and will get eaten up by larger stronger companies. A prime example is when Vera-Sun went under back in 2008, and Valero (oil company) bought up Vera-Sun’s assets at fire sale prices. So we can probably expect to see a repeat of this predatory grab, but this time it will probably involve companies like Exxon, BP, and Shell Oil. So the ADM’s of the world should be ever vigilant, because Big Oil is sitting back and waiting for that fire sale to arrive…