Ethanol supporters are worried Congress might roll back a 2007 mandate that dramatically boosts the use of ethanol annually through 2022. The mandate jumps from 15 billion gallons of renewable fuels — including cellulosic ethanol in 2015 — to 36 billion gallons by 2022.

The corn lobby has lost clout this year, losing votes in Congress. The Senate voted 73-27 in June to end the ethanol tax subsidy and tariff.

Eoin Treacy's view There were three primary supports for the US corn-fed ethanol industry. These were the subsidy, which has just expired, the mandate to consume more ethanol as an oxygenate in transport fuel and tariffs on imports of Brazilian sugar-fed ethanol. (Also see Comment of the Day on June 22nd). This section from an article on Wikipedia suggests the tariffs will also expire tomorrow. Here is a section:

In 2011 the U.S. Congress decided not to extend the tariff and the tax credit, and as a result both will expire on December 31, 2011

One has to wonder if the mandate will also be abolished since the removal of the subsidy and tariffs mean the US ethanol industry is going to have a much more difficult time surviving.

The removal of the subsidy, and tariff, should be a positive for ethanol prices because they will have to rise to economic levels or supply destruction will set in. Prices for the CME ethanol contract found support in the region of $2 three weeks ago and continue to unwind the oversold condition relative to the 200-day MA.

However, there is nothing to suggest that the mandate for increased ethanol use needs to be met by US corn-fed ethanol in the absence of a tariff against Brazilian imports. US ethanol blenders now have to pay close attention to the ratio between corn and sugar prices as well as the BRL/USD exchange rate.

The corn/sugar ratio has held a progression of higher major reaction lows since early 2010 and sustained move below 22.7 would be required to question corn's outperformance.

The US Dollar has also rallied impressively over the last few months and broke the three-year downtrend against the Real. A sustained move below BRL1.7 would be required to question medium-term scope for additional upside.