USDA: U.S. Ethanol exports strong, may weaken depending on policy

By Ann Bailey | September 02, 2015

Whether the United States will be able to hold on to its spot as the world’s No. 1 ethanol exporter will depend on market forces and government policy, according to a USDA report. 

The United States has been the world’s leading exporter for fuel since 2011, but lower domestic gasoline prices could pose a challenge for future ethanol exports, the report said. For example, a period of prolonged lower gasoline prices could discourage ethanol companies from expanding their plants and that could weigh on the potential availability of ethanol in the medium- or long-term, the report noted.

Future exports also will depend on U.S. ethanol plant capacity and biofuel policies. As of March 2015, installed production capacity of U.S. plants was slightly more than 15 billion gallons, from 1 to 2 billion gallons more than 13 to 14 billion-gallon blend wall, according to the report. The United States abuts the blend wall the most closely of all countries consuming ethanol blends.

As a result of the blend wall, and an increase in demand from Brazil and the European Union, the United States for the first time became a net exporter of ethanol in 2010, the USDA report noted. From 2011 to 2013, U.S. ethanol exports further increased and they remained strong in 2014, despite a falling oil prices. In fact, 2014 ethanol exports totaled 837 million gallons, more than any other year except 2011 when they were 1.2 billion gallons. The 837 million gallons of ethanol the United States exported in 2014 represented a 37 percent increase from 2013.

Brazil is the United States’ No. 1 ethanol customer. Other major U.S. ethanol customers are the Caribbean Basin and Canada. There is potential for several other markets, including Nigeria, Peru and Mexico to import more U.S. ethanol in the future, the report said

When it comes to policy, a continued increase in the blending rate in Brazil, the world’s second largest ethanol producer, could result in less Brazilian ethanol being available to compete with the United States on the global market. Meanwhile, Brazil could continue to import U.S. ethanol to help meet its mandate, USDA said.

Another U.S. biofuel policy which could have a potential effect on ethanol trade is if the U.S. renewable fuel mandate reduces the amount of ethanol that can be derived from corn, the agency said. That reduction has potential to eventually lead to a reduction in the U.S. ethanol production infrastructure, which, in turn, could limit the availability of ethanol for exports.