U.S. Ethanol Exports Expected to Set a New Record in 2017
S. Patricia Batres-Marquez
Decision Innovation Solutions
11107 Aurora Avenue Urbandale, IA 50322
This report covers U.S. ethanol exports to main destinations through November 2017. It also presents how some markets for U.S. ethanol are changing biofuel policies to revitalize their domestic biofuels sectors in order to accomplish their commitments to reduce greenhouse gas emission.
According to data released December 29, 2017 by the Energy Information Administration (EIA), U.S. ethanol exports during the first 10 months of 2017 totaled 1,094 million gallons. In addition, on January 5, 2018, USDA-Foreign Agricultural Service (FAS) released U.S. ethanol export data that included the month of November 2017. This data indicates the United States exported 107.2 million gallons of ethanol during that month. Based on these two data releases, the United States exported 1,201 million gallons of ethanol to all destinations from January to November 2017, up 13.1 percent from the same period in 2016 (1,062 million gallons). The data indicates ethanol exports during the first 11 months of 2017 broke the record high volume exported during the entire 2011 calendar year (1,195 million gallons) (see Figure 1). Brazil, Canada, and India were the main U.S. ethanol export destinations, making up 71.2 percent of total exports during January to November 2017. Through November 2017, U.S. ethanol was exported to 34 countries, up from 29 in 2016. Sixteen of these countries increased their volume of U.S. ethanol imported in 2017 compared with 2016.
Based on U.S. ethanol exports to all destinations during the first 11 months of 2017 (1,201 million gallons), an estimated annualized 2017 export volume of 1.310 million gallons would set a new record for U.S. ethanol exports.
Figure 1. U.S. Annual Ethanol Exports by Main Destination
Brazil: Leading Market for U.S. Ethanol (January to November 2017)
Brazil was the main market for U.S. ethanol during the first 11 months of 2017 with a total volume of 397.2 million gallons, making up 33.1 percent of U.S. total ethanol exports during that period. As Figure 2 indicates, the largest shipment of U.S. ethanol to Brazil was realized in May (64.344 million gallons). Since then, exports to that country have substantially declined. Exports in June 2017 fell 67.5 percent to 20.916 million gallons from the previous month. The latest data indicates exports in November 2017 (28.143 million gallons) recovered from the lowest shipment of the year registered during October (12.936 million gallons), which was the lowest since June 2016 (10.08 million gallons). In August 2017, Brazil implemented a tariff rate quota for ethanol imports allowing up to 600 million liters (158.5 million gallons) to enter duty free and a 20% tariff for volumes above that quota. These new regulations may have played a role in the decline in U.S. ethanol exports to Brazil, particularly since August 2017. Meanwhile, Brazil’s ethanol-gasoline blending rate remains at 27 percent (E27).
Brazil's RenovoBio Program Approved
In December 2016, Brazil’s Ministry of Mines and Energy proposed to create a regulatory framework, the RenovaBio program, to revitalize the country’s biofuels sector. The program’s intent was to boost energy efficiency gains in biofuels production and use, with the goal of improving energy security and lower greenhouse gas (GHG) emissions. This program serves as part of the greenhouse gas reduction commitments made under the 2015 Paris Climate Conference. Brazil committed to reduce its GHG emissions 37 percent by 2025 and 43 percent by 2030. RenovaBio was approved December 12, 2017. The program will recognize the different capacities of biofuels in achieving the GHG emission reduction goals.
Figure 2. U.S. Monthly Ethanol Exports: Selected Markets (Jan 2014-Nov 2017)
Canada: Second Largest Market for U.S. Ethanol Through November 2017
U.S. ethanol exports to Canada in November 2017 (24.2 million gallons) fell 29 percent from the previous month (see Figure 2). However, in 2017 (January to November), the Canadian market was the second largest market for U.S. ethanol with a 25.4 percent share of total U.S. ethanol exports during that period. Through November 2017, the United States shipped 305.1 million gallons ethanol to Canada, up 7 percent compared with January to November 2016 (284.7 million gallons) (see Figure 1).
Canada's Biofuels Policy Announcement: From Volumetric Requirements to Carbon Intensity Approach
As reported by USDA-FAS, on December 13, 2017, Canada announced a new federal Regulatory Framework on the Clean Fuel Standard (CFS) under the Canadian Environmental Protection Act, 1999. The new regulation would change Canada’s biofuel policy from volumetric requirements to a carbon intensity approach. The volumetric requirements for petroleum fuel producers and importers under current Renewable Fuels Regulations require an average ethanol content of at least 5 percent, based on the volume of gasoline, and an average renewable content of at least 2 percent, based on the volume of diesel fuel and heating distillate oil. These requirements will be kept in the short term, but long term the CFS will replace the Renewable Fuels Regulations.
The proposed framework intends to lower annual GHG emissions by 30 megatonnes by 2030. Canada aims to reduce overall GHG emissions to 30 percent below 2005 levels by 2030. Crude oil types produced either domestically or imported are not differentiated in the proposed CFS.
Under the proposed CFS, lifecycle carbon intensity (CI) requirements for the transportation, buildings and industry would be established. CI, expressed in grams of carbon dioxide equivalents (g CO2e) per unit of energy in megajoules (MJ), would account for GHG emissions over the lifecycle of a fuel. The effect of indirect land use change (ILUC) on GHG emission would not be included in the CI value estimates. The exclusion of ILUC in the CI estimates could potentially give U.S. crop-based ethanol a better position in Canada’s market compared with California’s market. Under California’s Low Carbon Fuel Standard (LCFS) policy, in addition to the direct emissions estimates, ILUC is added to the corn ethanol carbon intensity total estimate. According to LCFS, the ILUC for corn ethanol is 19.8 gCO2e per MJ.
A public consultation on the proposed CFS is expected to begin in January 2018. Draft regulations are expected to be published this year. Publication of the final regulation is expected in mid-2019.
India's Share of U.S. Ethanol Shipment above 10 percent in 2017 (January to November)
According to USDA-FAS, in 2009 India proposed an aspirational target of 20 percent blending of ethanol into gasoline by 2017. However, the maximum ethanol market penetration was only 3.3 percent and was achieved in 2016. The Government of India mandates the use of “indigenous ethanol only” for India’s ethanol blending program. The variability of domestic ethanol production is one of the factors that constrained ethanol supply in that country. India’s ethanol production uses sugarcane molasses as the main feedstock, and due to the cyclical nature of the sugarcane crop in that country, ethanol supply is unpredictable. India’s ethanol imports are for industrial use only.
In 2016 India imported 400 million liters (105.7 million gallons) of ethanol from all sources, with the United States fulfilling 86.4 percent of these imports. A forecast published by USDA-FAS in June 2017 indicated India’s expected 2017 ethanol imports from all sources would reach a volume of 500 million liters (132.1 million gallons). U.S. ethanol exports to India during the first 11 months of 2017 already surpassed the 2017 forecast by 20.5 million gallons. According to current data, the United States exported 152.6 million gallons of ethanol to India during the first 11 months of 2017 (Figure 1). This was the largest amount ever exported to that country, making India the third largest market for U.S. ethanol in 2017. U.S. ethanol exports to India represented 12.7 percent of U.S. total ethanol exports in 2017 (January to November). U.S. ethanol shipments to India in 2017 were up 71.5 percent compared with the same 11-month span in 2016 (89 million gallons).
2018 Outlook for U.S. Ethanol Exports to Brazil, Canada, and India
U.S. ethanol exports to Brazil may be lower in 2018 compared with last year as the imposed trade barriers severely reduce the competitiveness of U.S. ethanol and may limit U.S. ethanol exports to that country. Under Brazil’s new biofuels policy, RenovaBio, biofuels will be recognized as having different capacities to contribute to GHG reduction. U.S. corn ethanol will compete in the Brazilian market not only based on price, but also on its capacity to contribute to Brazil’s GHG reduction goals, which will depend on the program’s assessment of U.S. corn ethanol’s CI value.
Overall, Canada’s market for U.S. ethanol is expected to remain strong and steady in 2018. Two important issues related to the Canadian market are Canada’s new proposed federal Regulatory Framework on the Clean Fuel Standard (CFS) and the North America Free Trade Agreement (NAFTA) re-negotiations currently under way. Given the information available at this time, it is difficult to assess how the proposed CFS regulation, which seeks to change Canada’s Renewable Fuels Regulations from a volumetric requirements approach to a carbon intensity requirements approach, would impact U.S. ethanol exports to Canada. However, it is expected this policy will encourage the use of biofuels based on their contribution to GHG emission reduction relative to their fossil fuel substitute. As in the Brazilian market, under Canada’s proposed biofuels program, U.S. corn ethanol will compete in the Canadian market based on both its price and its contribution to reduce Canada’s GHG emission reduction targets. This would depend on carbon intensity of U.S. corn ethanol assigned under this program. Any change in Canada’s biofuels policy would take place after publication of final regulations in mid-2019.
Impending results of current NAFTA re-negotiation may impact future U.S. ethanol trade with Canada (and Mexico, the other U.S. NAFTA partner). The United States and Canada (and Mexico) benefit from free trade preferences allowed under NAFTA. The sixth round of negotiations will take place in Canada this month.
U.S. ethanol exports to India have a large growth potential, but India’s ethanol blending program needs added flexibility that would allow imported ethanol to be used in combination with its own ethanol production in ethanol-gasoline blending. Lifting this constraint would let India move beyond a 3.3 percent blending rate. Currently India’s ethanol imports are destined to the country’s industrial sector.
Batres-Marquez, S. Patricia. 2018. “U.S. Ethanol Exports Expected to Set a New Record in 2017." Renewable Energy Report, Agricultural Marketing Resource Center, Iowa State University. January.