Further, Kauffman says if a waiver were thrown in, RIN prices would drop to zero, possibly ensuring ethanol would be produced only to the blend wall.
Commodity prices, logically, have an effect on ethanol. Kauffman notes that crude oil prices also determine ethanol profitability. Current prices favor steady production.
"With Brent crude oil currently about $115 per barrel, it would take a corn price of approximately $8.90 per bushel, likely with some persistence, to activate substantial contraction in the ethanol industry," Kauffman writes.
Though high corn prices have softened exports and feed demand, Kauffman says further rationing will be necessary. However, the ethanol industry appears to be "unlikely to curtail its corn use much further. In fact, ethanol production has steadied since its summer slowdown," Kauffman writes. "Accordingly, market-based incentives emerging from crude oil and corn markets will stake the path forward."
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