USDA report highlights impact of CTPA on exports to Columbia

By Erin Voegele | December 01, 2014

A report recently filed with the USDA Foreign Agricultural Service’s Global Agricultural Information Network highlights the impact of the Columbia Trade Promotion Agreement on U.S. ethanol exports. The agreement went into force in May 2012.

According to the report, U.S. ethanol benefited from the CTPA for several months in late 2013 and early 2014, with monthly exports to Columbia averaging 3.75 million liters (990,645 gallons) per month from October 2013 to March 2014. The total trade value for that period of time was approximately $17.5 million. The report indicates exports prior to 2013 were negligible and the trade surge that resulted from the CTPA motivated the Columbian sugar industry to pressure the government to close the market.

The GAIN report notes that the Columbian government mandates gasoline be blended with 8 percent ethanol. The country has five ethanol plants, and the blend mandate is primarily met with domestically produced sugarcane ethanol. The price of sugarcane ethanol produced in Columbia is not set by market dynamics. Rather, the report explains a government subsidized price guarantees profits to the sugar industry. The government-set ethanol price is announced monthly. In October, it was $3.06 per gallon. All gasoline retailers that source domestic ethanol for blending must pay the price set by government.

According to the report, the CTPA resulted in favorable duties for U.S. ethanol, with the current per-gallon import prices approximately 30 percent lower than the price set by the Columbian government for domestically produced ethanol. As a result of the price differential, gasoline retailers were motivated to import U.S. ethanol.

As U.S. exports to Columbia began to increase in late 2103, the GAIN report notes Columbian sugar mills began to pressure the government to close the market to U.S. ethanol. A regulatory degree was published in April 2014 that provides the government of Columbia with the authority to restrict import volumes. By August, U.S. exports to Columbia had essentially been eliminated.

The GAIN report also highlights technical assistance the USDA providing to help Columbia develop second-generation biofuels technology. The assistance is being offered under the Cochran and Borlaug Fellowship programs. According to the report, six scientists have already been recruited for the Borlaug Fellowship. The program will establish research partnerships with U.S. universities and focus on second-generation biofuels made from harvest wastes. The report explains the objective of the outreach effort is to stimulate innovation and improve Columbia’s biofuels production efficiencies in support of a more positive approach to addressing import competition.

Data published by the U.S. Energy Information Administration illustrates the rise and fall of U.S. ethanol exports to Columbia. While exports to Columbia were essentially non-existent from 2010 through mid-2013, exports jumped to 24,000 barrels in August 2013. From October 2013 through March 2014, U.S. exports to Columbia averaged 23,000 to 24,000 barrels per month. Since that time, exports to Columbia have practically ceased, with the EIA reporting only 2,000 barrels of ethanol exports since April.

A full copy of the GAIN report can be downloaded from the USDA FAS GAIN website.