DES MOINES, IA - Since January 1 when its 45-cents per gallon tax credit expired, ethanol demand has waned while surpluses rose by 17%, the Des Moines Register reports.

Accordingly, Iowa??s 41 ethanol plants are realizing mounting losses, with ethanol??s price falling from $2.80 per gallon in mid-2011 to less than $2.20 per gallon since January 1. Additionally, ethanol exports to Brazil dropped by more than 100 million gallons last month because of unfavorable exchange rates between the US dollar and Brazilian Real.

"It??s safe to say that the majority of producers are in the red," said Rick Brehm, president of Lincolnway Energy in Nevada.

Walt Wendland, CEO and president of Golden Grain Energy in Mason City, Iowa, said the ethanol industry failed to respond proactively when the tax credit expired.

"Our industry didn??t cut back on production the way the oil refineries do," said Wendland.

Des Moines commodity broker Tomm Pfitzenmaier said continued losses could cause some plants to cut back production or eventually close, a problem for the state??s corn farmers, as ethanol plants consumer 60% of the state??s corn crop.

"The ethanol industry continues to be a concern for traders," Pfitzenmaier said. "The negative margins along with the fact that ethanol supplies are a record levels with exports beginning to fall away, is not a good situation going into the spring."

Wendland said ideally, ethanol would sell about 45 cents per gallon below wholesale, providing sufficient incentive for oil companies and distributors to blend the biofuel with unleaded gasoline.

"But an 70-80 cents per gallon spread between us and unleaded is too high," Wendland said. (Wholesale gasoline prices were at $2.90 per gallon last week.) "There??s just not much that can be done about it."