U.S. Ethanol Export Record Volume Through June 2018 Helping Increased Ethanol Production
By S. Patricia Batres-Marquez
Decision Innovation Solutions
This report covers U.S. ethanol exports to main destinations through June 2018. Discussions also include projected ethanol production, consumption, and blending rate in 2018.
Based on data published July 31, 2018 by the Energy Information Administration (EIA), U.S. ethanol exports from January to May 2018 were equal to 784.14 million gallons. Ethanol export data during the month of June 2018 (151.49 million gallons) was from USDA-Foreign Agricultural Service (FAS). The combined data shows the United States exported 935.6 million gallons of ethanol to all destinations during the first half of 2018. Exports were up 35 percent compared with the same period in 2017 (693.92 million gallons). As Figure 1 indicates, 2018 ethanol exports through June already surpassed the annual volumes exported during calendar years 2012 through 2015. In addition, the exported volume from January to June 2018, was already 80 and 68 percent of the volumes exported during the two preceding years, respectively. Brazil, Canada, and India continued as the leading destinations for U.S. ethanol. Based on volume, 59.7 percent of U.S. ethanol total shipments went to these three markets during the first half of 2018.
Figure 1. U.S. Annual Ethanol Exports by Selected Destination
U.S. Ethanol Exports to Brazil
Under the RenovoBio program, which is the National Biofuels Policy of Brazil initiated in December 2017, the ethanol mandate continues as established in March 2015, at 27 percent (E10). Also, still in place is the 159 million gallon (600 million liter) annual ethanol import tariff rate quota (TRQ), or 20 percent out-of-quota tariff. According to USDA, this TRQ will be reevaluated on September 1, 2019, two years after its implementation.
Brazil’s ethanol consumption is stimulated by the country’s large ethanol blending mandate and the constant high domestic gasoline prices. U.S. ethanol exports to Brazil grew 25 percent to 346.2 million gallons for the first six months of 2018. This indicates Brazil alone imported 37 percent of all U.S. ethanol shipments during that period and exports already surpassed the quota for the year. Despite the TRQ, the Brazilian market stays strong due to the competitiveness of U.S. ethanol. Because of lower ethanol price compared with Brazil’s, the price arbitrage favors U.S. ethanol exports to Brazil.
USDA’s projections indicate Brazil’s 2018 total ethanol imports would increase 15 percent to 528.34 million gallons (2.0 billion liters). Most ethanol imported by Brazil is expected to originate from the United States. If these projections are realized, U.S. ethanol exports to Brazil could still grow by 182 million gallons.
U.S. Ethanol Exports to Canada
Canada is the second largest market for U.S. ethanol so far this year. Exports in June increased 5 percent to 33.5 million gallons relative to the previous month. From January to June 2018, Canada’s imports of U.S. ethanol made up 17 percent of all U.S. ethanol shipments during that period and reached a volume of 159.6 million gallons. Exports to that country were up 7 percent year over year. Canada’s imports of ethanol are supported by federal and provincial renewable fuel programs whose volume requirements are not met by the country’s ethanol production capacity. Ethanol blending rates in Canada range from 5 percent to 8.5 percent. Based on USDA information, the United States supplies 98 percent of Canada’s imports. As indicated by USDA, the projection for Canada’s 2018 ethanol total import is down about 7 percent to 299 million gallons year over year; however, at this rate, the United States could still increase ethanol exports to Canada by about 139 million gallons during rest of 2018.
U.S. Ethanol Exports to India
U.S. ethanol exports to India in June 2018 (26.73 million gallons) were the second largest registered since March 2017 (36.162 million gallons). The volume of U.S. ethanol exported in June increased 405 percent from the previous months (5.292 million gallons). Despite the positive outcome in June, the total volume of U.S. ethanol exported to India during the first half of 2018 (70.08 million gallons) fell short by 15 million gallons (18 percent down) compared with the same time a year earlier. According to USDA, India’s National Policy on Biofuels-2018 proposes a 20 percent blending of ethanol by 2030, however only 3.2 percent ethanol blending is projected in 2018.
U.S. Ethanol Exports to Other Markets
Compared with 2017 (January to June), exports to the Philippines (43.7 million gallons), South Korea (44.5 million gallons), Singapore (18.8 million gallons) and United Arab Emirates (29.1 million gallons) were up 12, 91, 53, and 20 percent, respectively. In addition, exports to Peru (27.5 million gallons) and Mexico (14.0 million) grew 42 and 11 percent, correspondingly. There were only two shipments (53 million gallons) of U.S. ethanol to China during the first half of 2018. U.S. ethanol exports to China are hampered by China’s large tariff on U.S. ethanol since 2017.
Meanwhile, according to the Short-Term Energy Outlook report published by U.S. Energy Information Administration (EIA) in August 2018, 2018 ethanol production is projected to average 1.044 million barrels per day (see Figure 2), equivalent to an annualized production of 15.994 billion gallons. If the projection is realized, production would be up 0.94 percent from 2017 (1.03 million barrels per day, 15.844 billion gallons). Ethanol production from January to June (7,976 million gallons) and U.S. ethanol exports during the same period (935.63 million gallons) indicate the United States exported 11.8 percent of its ethanol production, which was up from the ethanol export share of production in 2017 (8.9 percent) during the same period. The increased share in U.S. ethanol exports relative to production so far this year, is good news for the industry considering the ethanol content of most of the gasoline consumed domestically does not exceed 10 percent by volume (E10). Note domestic ethanol consumption is expected to grow 0.6 percent to an average of 0.94 million barrels per day in 2018 compared with 0.93 million barrels per day in 2017. Gasoline consumption on the other hand, is expected to decline from 9.32 million barrels per day in 2017 to 9.31 million barrels per day in 2018. The rate of ethanol blended into gasoline is projected to increase to 10.2 percent in 2018 from 10.1 percent in 2017, reflecting a small increase in the consumption of higher ethanol blends in 2018.
Figure 2. Ethanol Production (Million Barrels per Day)
The diverse markets to which U.S. ethanol is exported, its price competitiveness, and favorable biofuel policies in other countries is contributing to the strength and expansion of U.S. ethanol exports this year, which in turn, are supporting the increasing U.S. ethanol production this year. 2018 import forecast for two major U.S. ethanol importers (Brazil and Canada) could add about 300 million gallons during the next six months of the year. It would require about 140 million gallons extra in exports to other markets to reach last year’s record volume of 1.379 million gallons. Ethanol export data for the month of July 2018 will be available at the beginning of next month.
Batres-Marquez, S. Patricia. 2018. “U.S. Ethanol Export Record Volume Through June 2018 Helping Increased Ethanol Production." Renewable Energy Report, Agricultural Marketing Resource Center, Iowa State University. August.