Markets are witnessing a jump in chatter about measures to curb use of corn in ethanol, even as Brazil cut the amount of the biofuel that blenders are required to mix into forecourt gasoline.
A call by Rick Perry, a Republican presidential candidate, last week for an end to the minimum level of ethanol use in the US appears to have touched a raw nerve, following the latest rally which drove prices to within 5% of record highs.
Rabobank analysts flagged the risk of the Environmental Protection Agency, which oversees US ethanol use, "temporarily repealing" the mandate which enforces a minimum of 15bn gallons being sold as of 2015, while viewing such an outcome as "unprecedented and unlikely".
Chris Hurt, a farm economist at Purdue University, forecast a growing likelihood that livestock feeders - who look like in 2011-11 having been overtaken by ethanol plants in corn use – would appeal to the agency to exercise emergency powers to cut the mandate.
Without a reduction, cuts to corn usage forced by prices which hit $7.65 ½ a bushel on Chicago's futures exchange on Monday, "will be thrust upon the non-fuel sectors, represented primarily by the domestic animal sector and exports", Professor Hurt said.
The EPA can issue a waiver to the ethanol mandate if it can prove "severe harm to the economy" from enforcing the rules.
However, the agency three years ago – turning down a request by Mr Perry, governor of Texas, to suspend the mandate – flagged the "high threshold for the nature and degree of harm" needed to warrant a waiver.
Paragon Economics and Steiner Consulting said in a report on Monday that it was "unclear how the agency would arrive at a conclusion" that the mandate was indeed a substantial economic threat.
Separately, crop markets commentator Mike Pierce said: "I understand the blending rate is a law but in times of great concern, a presidential mandate can suspend… the law with a deferred congressional approval."
He added: "How can we defend the current rate of ethanol usage? [Livestock] feeders are taking a bath and exporters are seeing demand dry up."
The jump in interest in ethanol comes as Brazil is cutting to 20%, from 25%, the minimum level of the biofuel it requires to be blended into gasoline, in the face of a disappointing cane crop, and an incentive from high prices to turn more of the harvested crop into sugar rather than fuel.
Edison Lobao, the Brazilian energy minister, said: "We realised that next year's harvest will not be much better than the current one. So we need to act early to think of the present and the future [with] a precautionary measure."
In the US, the Senate has cleared measures to curb forthwith a tax benefit for bioethanol blenders, of $0.45 a gallon, and a $0.54-a-gallon tariff on imports of the biofuel.
Many observers expect the perks, both of which are more than 30 years old, to be allowed to lapse at the close of this year.