Feds cut ethanol projections

Federal authorities are slashing ethanol projections for the year as a historic drought hits the nation’s corn harvest and causes prices to soar.

Already, the nation’s ethanol output has fallen about 14 percent over the past two months, according to the U.S. Energy Information Administration. The agency announced it has cut its production forecast from 900 thousand barrels per day to 830 thousand barrels per day for the second half of the year.

Ethanol is blended into the nation’s gasoline by government mandate. But the EIA said it doesn’t expect the reduced ethanol supply to significantly impact gasoline prices.

“The projected decline in ethanol production is generally matched by lower ethanol exports,” the agency wrote.

The drought has been ruled the worst in nearly a half-century and is expected to yield the smallest corn crop in six years, according to The Chicago Tribune.

The U.S. became the world’s top ethanol exporter last year, as bad weather hurt ethanol production in former leader Brazil, which makes its ethanol from sugarcane. Brazil’s woes continued this year, with ethanol falling below its 2010 average of 500 thousand barrels per day, according to the EIA.