EIA: US ethanol still likely to lead world export market

By Susanne Retka Schill | July 20, 2012

The U.S. ethanol industry is on track to be a net exporter of ethanol in 2012, although at lower levels that last year’s record. The U.S. Energy Information Administration (EIA) highlighted ethanol in its July 18 report, “This Week in Petroleum.”  

The EIA pointed to a number of factors that will influence the U.S. ethanol trade balance. “Sluggish gasoline demand, combined with ethanol blending limits, is currently restraining domestic consumption levels,” the report says. “At the same time, increased renewable fuel standard (RFS) mandates call for higher volumes in the fuel supply. In addition, sugarcane ethanol exported from Brazil looks to rebound from a low year in 2011 and compete with U.S. corn ethanol in the world market.”  Though there will be uncertainty, EIA is projecting U.S. export volumes will remain significant and lead world trade in 2012.

“During 2011, the United States exported a total of approximately 1.2 billion gallons of ethanol, compared to almost 400 million gallons in 2010. Brazil was the largest recipient of U.S. ethanol in 2011, importing 400 million gallons compared to approximately 20 million gallons in 2010; significant volumes of ethanol were also sent to Canada, Europe and the United Arab Emirates. Through April 2012, U.S. ethanol exports have fallen from second half 2011 levels, but are still significant at over 300 million gallons, while imports remain low at less than 30 million gallons with the majority coming from Brazil.”

The EIA discussed the impact of ethanol reaching the blend wall in the weekly report, saying the situation is not likely to change in the short term. “Recent reductions in gasoline demand as a result of high prices, the economic downturn, and greater efficiency standards have already reduced the pool of gasoline available to blend with ethanol; this pool could be again reduced if gasoline demand falls further,” the report says.

The interaction among the different fuels and mandates in the RFS is likely to create an ethanol swap between the U.S. and Brazil, with Brazil’s sugarcane ethanol being used to make up any shortfall in U.S. biodiesel production in meeting the RFS Advance Biofuel mandate, as well as the temporarily reinstated California Low Carbon Fuel Standard.  

“Ethanol production reached approximately 14 billion gallons in 2011, and after accounting for 1.2 billion gallons of exports, implied approximately 12.9 billion gallons were consumed domestically in 2011. Assuming similar levels of consumption in 2012 due to the blend wall, this means somewhere between zero and 500 million gallons of imported sugarcane ethanol, depending on biodiesel production, will comprise that 12.9 billion gallon total. In the absence of E15 or E85, this could lead to either reduced levels of domestic corn ethanol production and thus exports, or market conditions that encourage increased exports to both Brazil and other world markets as Brazilian sugarcane ethanol is exported primarily to the United States, which remains the major ethanol supplier to the rest of the world. In either scenario, it is possible that the 2012 RFS mandate of 15.2 billion gallons will not be met and banked credits from previous years will be used for compliance.”

Digging into the multiple tables outlining gasoline, crude oil and distillate production and stocks figures, EIA reported weekly ethanol stocks at 19.6 million barrels for the week ended July 13, up slightly from the previous week’s 19.5 million barrels, but down from the June 1 and June 15 highs of 21.2 million barrels. Ethanol stocks hovered around 17 million barrels a year ago, starting to build in mid-December to peak at 22.7 million barrels in mid-March. Weekly ethanol stocks have slowly decreased since, dipping below 20 million barrels in the first week of July.

EIA weekly ethanol production figures indicate production for the week ending July 13 at 802,000 barrels, down from the previous week’s 821,000 barrels and 873,000 barrels during the same week a year ago.  It is also the lowest production level since the EIA began reporting the “Weekly U.S. Oxygenate Plant Production of Fuel Ethanol” on June 4, 2010.