Flooded ethanol industry threatens US mandates

Reuters-UK
Fri Jun 13, 2008 10:56pm BST
By Timothy Gardner - Analysis

NEW YORK (Reuters) - Floods in the Midwest that have pushed corn prices to record levels have wiped out profits for making U.S. ethanol and threaten to sink production of the fuel below government mandates.

"If it's simply economically impossible to make ethanol. then (the government) may have to amend or suspend the Renewable Fuel Standard," analyst Pavel Molchanov at Raymond James and Associates in Houston said by telephone.

The floods ravaging the corn crop across at least eight states, including Iowa and Illinois, at a time of growing global demand have put another roadblock before the U.S. biofuels policy.

Hoping to wean the country off foreign oil, the Bush administration has boosted incentives and mandates for alternative fuels made from food crops. Many have blamed those steps for lifting food prices at a time of mounting hunger problems.

Corn prices for the new-crop July 2009 corn hit a record near $8 per bushel on Friday, while old-crop also hit a record above $7.

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