EPA ruling allays concerns over biofuels mandates

By Sam Nelson

CHICAGO (Reuters) - Investors who had bought corn betting that corn-based ethanol would prevail cheered on Tuesday as the U.S. Environmental Protection Agency confirmed the government's targets for biofuel use in the United States.

A draft ruling from the EPA also helped to allays fears among some investors that the administration of U.S. President Barack Obama could restructure mandates set by the former government on the blending of biofuels with gasoline through 2022.

Chicago Board of Trade corn futures took the decision in stride, with traders considering it a neutral factor. The spot contract closed up 0.1 percent at $3.98-1/2 per bushel.

"There wasn't much reaction in the corn market to the rulings because the U.S. is already bumping up against the limit of 15 billion gallons of ethanol (set for 2015) that can be made from corn and the EPA decisions won't affect that target," said Shawn McCambridge, analyst for Prudential Bache Commodities.

"I think there was some concern going in to today and psychologically it may be a little bearish for the corn market because it doesn't change the demand structure," he said.

The EPA on Tuesday issued a draft rule calling for increased use of advanced biofuels and to measure carbon dioxide emissions from the alternative motor fuels.

The steps are designed to reduce the impact biofuels have on the climate and food prices and the EPA said ethanol made from corn will still play an important role.

"Corn-based ethanol is a bridge to the next generation of biofuels," said EPA administrator Lisa Jackson in a teleconference.