Ethanol's Problem at the Pumps

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Dec. 26 (Bloomberg) -- Bloomberg’s Alix Steel reports on the U.S. scaling back its ethanol mandate and what that means for farmers. She speaks on Bloomberg Television's “Money Moves.” (Source: Bloomberg)

Ethanol the usa will use next year.

As a ruling, farm and corn producers will be watching it closely.

Tell us what is at stake here, alix steel?

Everything from oil, food, gas prices.

In november, the epa issued a draft rule lowering the amount of ethanol and gasoline refine rs would have to add by 2014. this comes after a lot of lobbying from big oil, the american petroleum institute spent about $2 million lobbying.

This is a big deal for the likes of exxon and chevron.

What was the issue with the renewable fuel standard?

Ethanol production is rising and gasoline production is falling, and that divergence is where the problem lies.

Demand for fuel is expected to be down 13% next year.

Each gallon of fuel needs to be blended with 10% ethanol, so you might think the easy solution would be to blend more ethanol, but the problem is, cars were not designed to run on gasoline with these high levels of ethanol.

Technically, all cars in 2001 are used -- approved for use in higher ethanol gasoline, but many companies do not warranty their cars.

The impact from a lower ethanol mandate would be what?

Job losses at some of the producers, archer daniels midland, bolero.

Technically, ethanol producers can make whatever they want.

They do not have a maximum.

Cash margins are still around four dollars which is pretty juicy.

They do have an impetus to keep working.

How will corn production be impacted?

I was speaking to an agricultural economist who says there were two main pillars that grow corn to those record highs.

Emerging market demand and ethanol demand.

That shifts the story.

Now you need to find new demand.

No longer our farmers looking at explosive growth.

They are looking to keep what they have.

Of course, you have the price of corn going down significantly after the epa announced their potential ruling.

The good news for us, maybe our food is worth less.

It will be good for chicken, livestock, etc., but it will have a ripple effect all over the farm economy, fertilizers, equipment makers.

We will be watching closely.

This text has been automatically generated. It may not be 100% accurate.

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