US expected to become world's top ethanol exporter

By Kris Bevill | August 26, 2011

A recent report from the U.S. DOE’s Energy Information Administration confirms what many in the ethanol industry already knew -- exporting ethanol has become big business. Rising demand for U.S. ethanol from overseas markets began in 2010 as a result of Brazil’s diminished production levels and a relaxation of trade restrictions in several countries, the agency stated in the report. But 2011 has proven to be a boom year for U.S. ethanol. Exports in the first five months were more than double the amount exported during the same timeframe last year, skyrocketing up to 120 million gallons during the month of May. The EIA expects this trend to continue through at least the end of the year.

“It is likely that the United States will surpass Brazil as the world’s largest ethanol exporter due to recent supply shortages and resulting high sugar prices in Brazil,” the agency stated in its analysis. “U.S. ethanol has been relatively less expensive and has supplied markets that previously imported Brazilian ethanol.” While Brazil’s need for U.S. ethanol  to make up for its own shortfalls in supply is well known, other parts of the world with an increasing appetite for U.S. ethanol include Europe, which was formerly supplied primarily with Brazilian sugarcane ethanol, Jamaica, the United Arab Emirates and Canada.

Demand for exports has served to alleviate some of the pressure placed upon U.S. producers as they nudge ever closer to the domestic blend wall. The EIA noted that the introduction of E15 to the U.S. market could play a role in future exports, as it is possible that demand for the higher blend could absorb additional domestic production. However, E15 is not yet legally available for sale in the U.S. and there continues to be doubt as to whether gasoline retailers will choose to invest in the infrastructure necessary to sell E15. Corn and sugar prices will also continue to have an effect on ethanol markets worldwide, as will oil prices, the EIA stated.

An interesting scenario addressed by the agency is the possibility that policies regarding ethanol use will result in corn ethanol leaving the U.S. for Brazil in exchange for that country’s sugarcane ethanol. Brazilian ethanol is considered an advanced biofuel in the U.S. renewable fuel standard (RFS) and is expected to become increasingly desirable as U.S. refiners look for an applicable source to replace non-existent cellulosic biofuel volumes. California’s low carbon fuel standard also gives preference to Brazil’s ethanol, which it considers to be considerably lower in carbon than domestically produced corn ethanol. The irony of this scenario has not been lost on at least one ethanol producer. In comments submitted to the U.S. EPA earlier this summer, Neill McKinstray, vice president and manager of The Andersons Inc. ethanol division, urged the agency to allow corn-based ethanol to qualify as an advanced biofuel in order to prevent an ethanol swap situation between the U.S. and Brazil.