Ethanol 2019 Export Highlights

Source: U.S. Census Bureau Trade Data - BICO HS-10

Highlights

The United States exported 1.5 billion gallons of ethanol valued at $2.4 billion in 2019. This was a 13 percent decline from the record 1.7 billion gallons set in 2018, and the first annual volume decline since 2013. Export value dropped a similar percentage with little change in prices. With no change in exportable supply in 2019, weaker Brazilian demand and higher China tariffs accounted for most of the 2019 export decline. Low sugar prices and gasoline tax policy boosted Brazil’s demand for domestically produced hydrous ethanol, raising Brazilian production to record levels. As a response to Brazil’s increased production, demand for anhydrous ethanol (supplied by the United States) dropped. U.S. anhydrous ethanol remained price competitive with Brazilian product lessoning the impact from an above-quota 20 percent tariff that Brazil has maintained since September 2017 on ethanol imports under a tariff rate quota. China’s fuel ethanol imports, both direct and indirect, were negligible in 2019. The last significant sales to China ended in April 2018 when the duty was raised to 45 percent. Shipments for use as other industrial chemicals to India, South Korea, and Mexico remained strong.

Drivers

• Regulations, limited infrastructure and competition with petroleum producers limit U.S. growth of ethanol blends above 10 percent. Limited blending growth and a mostly static ethanol-gasoline fuel demand limit U.S. domestic market expansion, raising the importance of export growth.
• For most of 2019, U.S. ethanol prices were 20-45 percent below the prices of foreign competitors and ethanol importers. The price of U.S. ethanol relative to the global cost of reformulated gasoline with other fuel additives continues to favor ethanol blending in transport fuel.  Policy changes will be needed to open these markets.
• Japan first imported ETBE containing U.S. corn ethanol in July 2019, following a 2018 change in policy which earlier only permitted the use of Brazilian ethanol derived from sugarcane. The estimated annual market value is $170 million at 2019 prices.
• Countries blend biofuels into their fuel supply to lower carbon emissions and air toxins when striving to meet environmental and human health goals. But few countries have biofuel programs if they do not have domestic feedstock to support it, and when they do, typically establish barriers against imports.
• The United States has free trade agreements with four of the top ten ethanol export destinations, which help reduce barriers to U.S. ethanol.

Global Ethanol Exports

The COVID-19 outbreak has devastated global demand for liquid transport fuel and is expected to drive ethanol exports to levels not seen since 2007. When the world comes out of the pandemic and economic activity returns to pre-COVID-19 levels, ethanol exports will return to a pattern of growth. The United States supplies half of global ethanol trade (value basis) and will remain the dominant ethanol exporter over the coming decade due to large corn stocks and the world’s most price-competitive ethanol. Demand for mobility grows as population and incomes grow, but ethanol blending is only one of several means to meeting increased demand for mobility that is greener and lowers human health risks. Increased mass transport, improved fuel efficiency, telework, and alternative drive trains like electricity are all options in play and ethanol must compete for market share among these factors. Japan’s new ETBE policy, the EU’s removal of anti-dumping duties, and an improved share of Japan and South Korea’s imports of ethanol used as industrial chemicals help sustain U.S. exports. Arbitrary anti-dumping cases, burdensome licensing regulations, Brazil’s tariff rate quota, high China duties, and import bans imposed by Argentina, India, and Thailand, all limit (or threaten to limit) the United States’ ability to export ethanol.

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