The Senate in a 73-27 vote approved an amendment to end the 45-cent-a-gallon subsidy the government gives refiners and the 54-cent-per-gallon tariff on imported ethanol, which would be a boon to a major ethanol-producing country such as Brazil that makes ethanol from sugarcane.

The Senate measure still faces a long road to becoming final. The White House issued a statement saying it was against a full repeal of ethanol subsidies, indicating it could use its veto power if the amendment continued to advance in Congress.

"We need reforms and a smarter biofuels program, but simply cutting off support for the industry isn't the right approach," said Agriculture Secretary Tom Vilsack.

The strong vote in favor of eliminating the $6 billion a year in ethanol subsidies reflects the push by both parties to rein in the government's huge deficit.

"The way we get out of trouble as a nation is a couple of billions of dollars at a time," said Republican Sen. Tom Coburn, who co-sponsored the ethanol amendment.


The Senate vote also comes as criticism mounts globally over subsidies for corn-based ethanol, blamed by some for raising food costs.

Last week, the World Bank and other international organizations called on governments to stop their ethanol subsidies because of concerns they were driving up world food prices.

While more ethanol is good for corn farmers, U.S. livestock producers argue their feeding costs have gone up, which has raised food prices.

The National Cattlemen's Beef Association supported the move, along with several livestock associations.

“Repealing the VEETC and the import tariff are important steps to fully leveling the playing field for a bushel of corn. We commend the 73 U.S. Senators who supported the Feinstein/Coburn amendment,” said NCBA president Bill Donald. “Cattlemen aren’t opposed to ethanol. But after 30 years and more than $30 billion in taxpayer support, the day has come to let the mature corn-based ethanol industry stand on its own two feet.”

Corn prices have slumped more than 12 percent since hitting a record high near $8 a bushel on Friday. Traders are betting on reduced demand from ethanol makers whose profit margins are being squeezed between near-record corn cost and falling gasoline prices.

The sell-off has been led by investment funds, traders say, in part because of the increasingly hostile political climate that they believe may diminish demand prospects in the years ahead.

Lawmakers are working on other compromise measures to scale back the subsidies that are also due to expire by the end of this year.

On Tuesday the Senate fell far short of the 60 votes needed on a similar amendment that would have stripped the industry of federal incentives .

The ethanol subsidy amendment on Thursday from Coburn and Democratic Senator Dianne Feinstein will be tacked on to an underlying economic development bill, which faces a difficult time passing the Senate.

Meanwhile, the House of Representatives voted 283-128 on Thursday to prevent Agriculture Department funding for tanks and blender pumps that the ethanol industry wants so stations can sell gasoline with higher ethanol blend rates.

The Senate took the opposite view, voting against a separate amendment that would have blocked federal funding for such ethanol infrastructure.end_mark

-- From Reuters and NCBA press releases