US fuel ethanol exports will be boosted by strong international demand and low US prices

In-Depth Analysis November 6, 2024 Data Source: US Energy Information Administration, Petroleum Supply Monthly Note: Annual average for 2024 is year-to-date average through August. US fuel ethanol exporters are on track to export a record amount of the fuel in 2024. The increase in exports this year was driven by demand in countries with biofuel blending mandates and lower-than-usual US fuel ethanol prices. Fuel Ethanol is a renewable fuel made by fermenting sugars from biomass, usually corn in the United States, which is often blended with gasoline. How much fuel ethanol has the United States exported so far in 2024? In the first eight months of 2024, US fuel ethanol exports averaged 121,000 barrels per day (b/d)—the most fuel ethanol exports in the first eight months of any year. Exports rose steadily in 2024, surpassing 100,000 b/d in each of the first eight months of this year. By comparison, US fuel ethanol exports exceeded 100,000 b/d in less than a quarter between 2019 and 2023. Before 2024, how much fuel ethanol did the United States typically export? Over the past five years (2019–23), US fuel ethanol exports averaged between 80,000 b/d and 100,000 b/d. Annual fuel ethanol exports only exceeded 100,000 b/d in 2018, averaging 112,000 b/d per year as they export most to Brazil. Since 2018, US fuel ethanol exports to Brazil have decreased significantly due to Brazil’s tariffs on ethanol imports and its growing domestic production. Where are the increased exports going? Increased fuel ethanol exports to Canada, Colombia, India and the United Kingdom account for more than 60% of growth from 2023 to 2024. In the first eight months of 2024, exports are on track to exceed 2023 volumes to 30 countries and have already exceeded full-year 2023 volumes to 21 countries. Data Source: US Energy Information Administration, Petroleum Supply Monthly Note: Annual average for 2024 is year-to-date average through August. The largest increase in fuel ethanol exports is to India, which has ambitious fuel ethanol blending targets under its Ethanol Blended Petrol (EBP) program. India is the third most popular destination for US fuel ethanol exports. After declining in 2022 and 2023 due to supply chain costs and increased US fuel ethanol prices, US fuel ethanol exports to India rebounded to record levels in 2024, slightly above the 2017 to 2020 peak. Imported ethanol to meet blending targets India uses imported ethanol for industrial purposes, freeing up domestic production for its transport blending targets. With the recent reduction in sugarcane and rice production, India is increasingly dependent on imports of US fuel ethanol to meet industrial sector demand and free up domestic ethanol production for EBP targets. The second largest increase in fuel ethanol exports is to the United Kingdom, which will be the second most popular destination for US fuel ethanol exports in 2023. Fuel ethanol consumption in the United Kingdom has been increasing since the UK government implemented the E10 standard. In September 2021. In addition, fuel ethanol will help meet increasing renewable energy targets in the United Kingdom’s Renewable Transport Fuel Obligation Program. The United States is sending more fuel ethanol to Canada. Canada is already the United States’ top destination for fuel ethanol exports and will become increasingly dependent on US fuel ethanol exports as regional blending mandates and programs grow. Colombia remains the fourth-largest destination for US fuel ethanol exports, and this year’s increase is due to the reintroduction of the E10 mandate and lower domestic ethanol production. Exports to Brazil, the Philippines and Singapore have increased significantly, although these countries are minor export destinations. Why are other countries importing their fuel ethanol from the United States? The United States is the largest global producer and exporter of fuel ethanol, and US fuel ethanol prices in 2024 are relatively low. In addition, we expect fuel ethanol exports from Brazil, the second largest producer and exporter of the fuel, to decrease. In 2024 compared to 2023. The annual average price of fuel ethanol in 2024 in the US Gulf Coast, where most US fuel ethanol exports originate, has fallen nearly 25% since 2023 and is the lowest since 2020. On an inflation-adjusted basis, prices are the same as prices in 2018 and 2019. Data Source: Bloomberg LP and US Bureau of Labor Statistics, Consumer Price Index Note: The annual average for 2024 is the year-to-date average through August. US fuel ethanol prices remain low in 2024 due to large domestic inventories. US fuel ethanol inventories in 2024 have consistently exceeded the five-year (2019-23) average and exceeded the five-year high due to relatively high production and relatively low consumption. Fuel ethanol production hit a record high in July and is on track for its highest annual level since 2018 due to increased production capacity and lower input prices. US fuel ethanol production capacity increased in 2023 and continued to grow in 2024. Low input prices have enabled fuel ethanol producers to maintain healthy profit margins and utilization levels despite increased competition from new production capacity. Corn, the feedstock used to produce virtually all fuel ethanol in the United States, is trading at its lowest point since 2020 due to a strong production outlook and general concerns about an oversupplied market. Natural gas, which is used as a fuel for ethanol production, is trading at extremely low prices due to record US natural gas production, flat natural gas consumption and relatively high natural gas inventories. While U.S. fuel ethanol production is at a record high, consumption of the fuel is significantly lower than pre-pandemic peaks. Virtually all fuel ethanol consumption is for motor gasoline blending, so fuel ethanol consumption tends to track with motor gasoline consumption, which is below pre-pandemic peaks due to structural changes that reduce demand for the fuel. Principal Contributor: Jimmy Troderman