Government ethanol incentive to end this summer  The government currently subsidizes the ethanol industry, which analysts assert has contributed to the surge in corn prices over the past year. The multi-billion dollar program is likely to end this year, according to a published report.

The New York Times reports that the $5 billion-a-year ethanol subsidy program will likely end as it becomes yet another casualty of the ongoing budget deficit talks in Washington D.C. Still, analysts assert that the end of the program won't likely cause corn prices to drop that much, and that it will also not have an effect on the supply of ethanol.

Ethanol, which is a fuel additive that is made from corn and was considered an environmentally friendly additive, has been assailed over the past few years by consumer watchdog groups who have charged officials with pandering in their strong charge for the financing. While roughly 10 percent of fuel used to power cars is comprised of the additive, many experts have doubted whether it has done much to reduce greenhouse gases.

In fact, large amounts of corn are used to create ethanol, meaning that the food source doesn't find its way to people throughout the world. With global food demand and prices surging simultaneously, analysts and officials are increasingly concerned about dwindling corn stockpiles.

At the end of this year, a tax of 45 cents per gallon will expire. Though the tax didn't directly go to ethanol providers, it was used to incentivize big oil companies like BP, Valero Energy and ExxonMobil to buy ethanol and blend it with gasoline. Analysts affirm that such tax incentives were unnecessary from the beginning, as the government mandates that the country produce an ever-increasing amount of renewable fuels such as ethanol.

"What do you need a tax credit for when you have this built-in huge market in the United States?" Iowa State University economist Bruce Babcock asked. "The U.S. ethanol industry is very competitive; they don't need the [subsidy]."

Last week, the U.S. Senate voted to end ethanol subsidies and the U.S. tariff on ethanol imports by July - more than a year-and-a-half ahead of schedule. The Volumetric Ethanol Excise Tax Credit (VEETC), was created back in 2004 to spur the use of ethanol, but many critics contend all it served to do was drive up corn prices and contribute to food shortages.

Corn is the biggest U.S. crop, followed by soybeans. 
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