U.S. Ethanol Exports: What's the Trend and Where are They Being Shipped?
AgMRC Renewable Energy & Climate Change Newsletter
Dr. Robert Wisner
Recent news stories have highlighted a sharp rise in U.S. ethanol exports.That’s especially significant as the U.S. domestic market for ethanol approaches a “blending wall” and recent Congressional and legal actions raise questions about the future of E-15 (15% ethanol-85% gasoline motor fuel blends). Ethanol exports provide a market for ethanol beyond what the domestic market is able to absorb. In this article, we review recent and historical trends in U.S. exports of ethanol, identify major foreign markets, review their stability or lack of it, and provide a perspective on the size of exports relative to domestic production.
Figure 1 shows total U.S. ethanol exports by corn marketing year since1989-90. Exports have fluctuated substantially from year to year. Two of the last three years have traced out record highs in U.S. ethanol exports, but it is too early to determine whether these are the start of a new long-term trend. More insight on that will be available as we examine ethanol exports by country of destination.
The historical year-to-year variability has been due partly to availability of exportable supplies from other countries. Gasoline prices also may have had a small influence on attractiveness of ethanol imports in some countries, although that likely has been only a minor influence.
Exports by Destination
U.S.ethanol exports have at various times over the last 21 years gone to as many as 90 different countries and regions, although many of these have purchased only very small quantities of U.S. ethanol. In addition, many of them have not been consistent markets, but purchased a few thousand gallons and then have been out of the market for many years. Figure 2indicates that four countries or regions have accounted for most of U.S.ethanol markets. These are Canada, EU, Brazil, and Mexico. Even these countries have shown large fluctuations in their purchases of U.S.ethanol. As shown in Figure 2, Brazil was the largest foreign market for U.S. ethanol at times during the early and mid-1990s. After 1996-97,its purchases dropped to very low levels although it purchased some ethanol each year. Last year, its purchases moved up to modest levels for the first time in 14 years. Brazil for decades has had its own very aggressive ethanol production program, with its ethanol made from sugarcane. The world sugar market, like that of other food commodities, is subject to large fluctuations, depending on weather and world production. In the current season, partly because of crop and weather problems plus reduced acreage in some important foreign sugar producing areas, sugar prices have been at historically high levels (1) (see Figure 3). Countries with reduced production included Brazil, which produces about ¼ of the world’s sugar crop and India which as recently as four years ago produced an even higher percentage. High sugar prices and a strong currency have encouraged the Brazilian sugar industry to devote more of its sugar cane crop to producing sugar rather than ethanol. As a result, Brazil has needed a very modest amount of U.S.ethanol to fill out its domestic ethanol requirements. For the longer term, Brazil has plans to continue expanding its sugar production and ethanol output. It has developed infrastructure for exporting ethanol,including an export terminal at the port of Santos and a pipeline for transporting ethanol to that area. Barring continued world sugar production problems, Brazil probably should not be viewed as a stable long-term market for U.S. ethanol.
Most Dependable Export Markets
Canada appears to be the most dependable export market for U.S. ethanol, due to its biofuels mandates, closeness to U.S. ethanol plants, and transport costs. Exports to EU also look promising, although Brazilian ethanol exports may well be a substantial source of competition in that market for the longer run.
Mexico has been a much smaller market for U.S. ethanol than Canada and EU, and its longer term potential also may be tempered by Brazilian competition. While its closeness to the U.S. might be expected to be a competitive advantage for U.S.-produced ethanol, the American ethanol industry is concentrated in the Midwest. Most plants are hundreds of miles from the Mexican border and expensive rail transport of ethanol is required to move U.S.ethanol to Mexico. Since Mexico borders the Gulf of Mexico, it has easy access by ship to Brazilian ethanol at relatively low transport costs.Thus, with a recovery in world sugar production, Brazilian ethanol maybe a substantial source of competition in the Mexican market.
Other Promising Growth Markets
Figure 2, besides showing the four most consistently large export markets for U.S. ethanol, also shows combined U.S. ethanol exports to all other destinations. The volume of U.S. exports to smaller markets also has been quite variable from year to year, as shown in the “Others”category. This category in Figure 2 includes 86 regions and/or countries, each of which usually has imported only small quantities of U.S. ethanol in most years. The largest of these markets typically have been Australia, the Philippines, Sub-Saharan Africa, South Korea, and Singapore, although a few others have purchased significant quantities in some individual years.
Figure 4 shows U.S. ethanol exports to these countries for each year since 1989-90. Note that the largest importer in any year over this period was Sub-Saharan Africa in 2009-10,with almost 8.5 million gallons. The second-largest was Australia, with slightly less than six million gallons in each of two years. These are very small quantities when compared with efficient recently constructed U.S. ethanol plants that are capable of producing 90 to 110 million gallons per year. For the longer term, these markets may offer some growth potential from current very small levels as their governments respond to pressure to diversify fuel supplies and reduce greenhouse gas emissions. Political uncertainty in North Africa and the Middle East may also tend to accelerate ethanol imports in some of these nations.
U.S. Ethanol Exports in Relation to Total Output
Figure 5 puts recent U.S. ethanol exports in perspective versus domestic production. While recent exports have been record size, they remain very small in comparison with domestic production. That’s not to say that ethanol exports are unimportant to the ethanol industry. On the contrary, they represent an additional outlet for production beyond that mandated by federal 2007 energy legislation (2) and beyond market limitations that may occur because of the blending wall. (3)
As an additional comparison of the relative size of U.S. ethanol exports, in 2009-10 they represented the annual output from two and one-half to three efficient-sized Midwest biorefineries.
Future trends in U.S. ethanol exports are difficult to predict and will depend on a number of developments, the most important of which seems likely to be sugar prices and exportable supplies of ethanol from Brazil. Turmoil in North Africa and the Middle Eastern oil producing countries could also be a catalyst tending to increase export demand for U.S. ethanol.
1 Maurice R. Landes, “Indian Sugar Sector Cycles Down, Poised to Rebound”, USDA Economic Research Service, Outlook Report No. (SSS-M-260-01), 20 pp, April 2010 and Sugar: World Production Supply and Distribution, November 2010, United States Department of Agriculture Foreign Agricultural Service
2 U.S. Energy Independence and Security Act of December 2007
3 For an explanation of blending wall issues, see R. Wisner, Ethanol Industry Approaches the Blending Wall - Cellulosic Ethanol Investments Severely Threatened, Ag Marketing Resource Center Renewable Energy Newsletter, May 2010