Principal contributor: Sean Hill
According to EIA monthly supply data through December 2014, which EIA released in late February, U.S. exports of fuel ethanol in 2014 reached their second-highest level at a total of 826 million gallons. This level was second only to the 1.2 billion gallons exported during 2011 and 33% more than exports of fuel ethanol in 2013. Similarly, U.S. imports of ethanol, which totaled approximately 377 million gallons during 2013, fell by 81% to a total of 73 million gallons in 2014, their lowest annual level since 2010. As a result, the United States was a net exporter of fuel ethanol for the fifth consecutive year and exported the fuel to 37 different countries in 2014.
In the United States, ethanol is primarily used as a blending component in the production of motor gasoline (mainly blended in volumes up to 10% ethanol, also known as E10). Corn is the primary feedstock of ethanol in the United States, and large corn harvests have contributed to increased ethanol production. The U.S. Department of Agriculture estimates that the United States produced a record 14.2 billion bushels of corn in 2014, 3% higher than the previous record set in 2013.
Given the uncertainty surrounding future Renewable Fuel Standard (RFS) targets and the lack of significant demand for higher ethanol blends in 2014, the growth in ethanol output had two primary outlets: it can either be blended into domestic gasoline or it can be exported. U.S. gasoline blending grew for the second consecutive year in 2014, with gasoline consumption increasing slightly from 2013 levels. As gasoline consumption increases, more ethanol is able to be used as a blendstock (as E10). Additional volumes of ethanol beyond requirements for E10 blending and relatively small volumes used in higher ethanol blends such as E85 (85% ethanol and 15% gasoline) were exported in 2014.
Canada remained the top destination for U.S. ethanol exports in 2014, receiving 336 million gallons, or about 41% of all U.S. ethanol exports. Brazil, the United Arab Emirates, and the Philippines all imported at least 50 million gallons of U.S. ethanol in 2014; 33 other countries received less than 50 million gallons each. U.S. ethanol has been a competitively priced octane booster for gasoline in foreign markets as well as an attractive option for meeting renewable fuel and greenhouse gas emissions programs standards. In addition, countries such as Canada and Brazil have ethanol blending mandates that continue to generate demand for U.S. ethanol.
Export volumes to Brazil increased by 146% in 2014 in part because of the need to meet Brazilian ethanol demand. Brazilian ethanol producers have already lost significant market share internationally over the past few years as U.S. exports have grown, in large part because of abundant U.S. corn harvests. As a result, reports state that as many as 60 Brazilian ethanol plants were temporarily closed in 2014. Brazilian ethanol producers were also hurt by a lack of U.S. ethanol import demand in 2014, driven by uncertainty surrounding future RFS targets in the United States, which have been a strong driver of U.S. demand for sugarcane ethanol from Brazil in previous years. Sugarcane ethanol, unlike corn ethanol, generally counts as an advanced biofuel under the RFS program, which includes targets for several distinct categories of biofuels.
The United States imported 73 million gallons of ethanol in 2014, a decrease of more than 81% from 2013. About 74% of U.S. imports came from Brazil, with the remaining gallons primarily from Guatemala, Canada, and the Netherlands. U.S. import demand for ethanol was driven lower primarily because of RFS targets that are not yet finalized along with strong domestic production and import quantities of biomass-based diesel, which, like sugarcane, also counts as an advanced biofuel under the RFS program. The California Low Carbon Fuel Standard, which includes incentives for increased blending of sugarcane ethanol, did little to draw in Brazilian volumes of ethanol in 2014, with slightly more than 10 million gallons entering the United States on the West Coast, down from 126 million gallons in 2013.
Given the existing ethanol production capacity coupled with the ongoing constraints for blending ethanol into domestic gasoline, the United States likely will continue to remain a strong exporter of ethanol in 2015. Ultimately, the key drivers for ethanol exports this year are the finalized levels of RFS targets for 2014 and 2015, future corn crop yields, and ethanol producer profitability. Increased exports of ethanol to Brazil in 2015 may be supported by an increase in the Brazilian ethanol blend level from 25% to 27%, which took effect in mid-March.