Market talk: Threat of pullback in U.S. ethanol policy is real

A smaller-than-expected US corn crop and continued demand pose a serious threat to US ethanol policy, says Dahlman Rose. Pressure on the federal ethanol-production mandate is building as livestock producers struggle to remain profitable and worry about shortages.

Dahlman Rose had expected corn would need to rise to $8-9/bushel for the US government to consider changes in its policy for corn-based fuel, but it now says the threshold may be somewhat lower. "With no relief in the US supply situation until at least 4Q/2012 and without significant reductions in demand, we see the threat as credible."

Corn for December delivery was up 1.6% overnight to $7.03 1/2.

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