(Bloomberg) The U.S. Senate voted to eliminate a tax credit and a tariff that subsidize ethanol production, providing the strongest signal yet that Congress will curtail subsidies for corn-based biofuel.

The 73-27 vote exceeded the 60-vote threshold needed to advance the measure as part of an economic development bill. While the underlying legislation isn’t likely to become law, the vote indicated that it will be difficult for ethanol supporters to extend the 45-cent-a-gallon tax break and the 54-cent-a- gallon tariff beyond their scheduled Dec. 31 expiration.

“We need to look at ways that we can bring the budget deficit down,” said Senator Ben Cardin, a Maryland Democrat who said poultry producers in the eastern part of his state are facing higher prices for corn because of ethanol production. “Repealing unnecessary subsidies should clearly be at the top of our list.”

Today’s action came two days after the Senate voted 59-40 against advancing a similar proposal from Senator Tom Coburn, an Oklahoma Republican. Democratic leaders, who wanted to assert their control of the chamber’s proceedings, urged their members to oppose that proposal in protest of the way Coburn forced a vote.

“There is essentially agreement that this subsidy has to be phased out and taken away, and the producers of ethanol agree,” said Senator Dan Coats, an Indiana Republican.

Stock Reaction

Tyson Foods Inc., the largest U.S. poultry producer, rose after the vote. Archer-Daniels-Midland Co., the world’s largest grain producer, dropped. Springdale, Arkansas-based Tyson was up 48 cents, or 2.7 percent, to $18.07 at 3:45 p.m.; Decatur, Illinois-based ADM fell 5 cents, of 0.2 percent, to $29.53 at 3:46 p.m. after earlier trading for as much as $29.93. Corn Products International Inc., a corn refiner based in Westchester, Illinois, a corn refining company, fell $1.52, or 2.8 percent, to $53.16.

Leticia Phillips, the Brazilian Sugarcane Industry Association’s representative in North America, said in a statement that the Senate vote to end the credit and tariff on imported ethanol “will help lower fuel prices and provide Americans with greater access to clean and affordable fuels like sugarcane ethanol.”

Administration Opposition

Agriculture Secretary Tom Vilsack reiterated the Obama administration’s opposition to ending the ethanol credit now and said the Senate measure “isn’t the right approach.”

Senator Charles Grassley, an Iowa Republican and an ethanol backer, said the vote would encourage lawmakers to target other tax benefits for the energy sector.

“Before the year’s out, you’re probably going to have people attack wind and solar and biomass and biodiesel,” he said in a brief interview.

Farm-state lawmakers such as Coats are supporting a more gradual reduction in ethanol support proposed by Senator John Thune, a South Dakota Republican and Senator Amy Klobuchar, a Minnesota Democrat.

Senator Dianne Feinstein, a California Democrat who opposes ethanol tax incentives, said lawmakers on both sides of the issue are searching for a compromise.

Feinstein and Coburn are working with a coalition that includes anti-hunger groups worried about food prices, taxpayer advocates who call the ethanol program wasteful and animal agricultural processors that compete with ethanol producers for feed.

“Turkey is going to become an endangered species,” Feinstein said.

McCain’s Proposal

The Senate later rejected 40-59 a proposal from John McCain, an Arizona Republican, that would have prohibited federal funding for certain ethanol pumps or storage facilities.

A similar measure in the House offered by Representative Jeff Flake, an Arizona Republican, was adopted 283-128.

“Nobody can defend ethanol subsidies anymore,” Flake said.

Grover Norquist of Americans for Tax Reform, who has persuaded 40 of 47 Republican senators to sign his no-tax- increase pledge, regards the elimination of a tax break as a tax increase.

Coburn, who drew the support of 33 other Republicans on June 14, has been challenging that view. He contends that some tax breaks look more like spending programs and should be eliminated without being paired with a tax cut.

Coburn also has said that some tax breaks will have to be trimmed to get a broader agreement on reducing the federal budget deficit.

Norquist’s group said that it wouldn’t consider a vote for the ethanol proposal a violation of the pledge provided that lawmakers also support a proposal from Senator Jim DeMint of South Carolina that would eliminate the ethanol usage mandate and the estate tax.

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