Ethanol demand continues to rise despite setbacks

WASHINGTON — Through the supply chain disruptions and pandemic restrictions, 1.22 billion gallons of U.S. ethanol were exported to 110 countries in 2020-2021.

This marked the fifth highest export total to date and utilized 433 million bushels of U.S. corn.

“This is increasing year over year. So, despite these setbacks, demand for ethanol does continue to rise. It really is a good outlook and exports remain strong despite the disruptions over the last two years,” said Isabelle Ausdal, U.S. Grains Council manager of global ethanol policy and economics.

Canada was the leading importer of U.S. ethanol last marketing year, purchasing 349 million gallons, followed by India at 144 million, South Korea at 137 million, China at 132 million and the European Union and United Kingdom at 108 million.

USGC added ethanol to its advocacy efforts in 2017 and has since expanded its efforts to expand market opportunities.

“Our focus countries that our program is currently working on are broken down into three tiered markets. Priority markets are Brazil, Canada, China, India, Japan, Indonesia and Mexico. Two-tier markets are Colombia, South Korea, Philippines, Vietnam, Peru, European Union and United Kingdom,” Ausdal said. Countries and regions being focused on in 2021-2022 are Nigeria, Ghana, Kenya, Egypt, Persian Gulf, Chile, Ecuador, Central America, Taiwan, Australia and New Zealand, she said.

Policy-Driven

Ethanol’s successes and failures hinge on policies, and USGC has made policy a fundamental focus in its ethanol marketing.

Twenty years ago, pre-Renewable Fuels Standard, less than 5 billion gallons of ethanol were produced globally each year. “Fast-forward to today, the RFS is implemented, we see other countries follow with fuel standards and mandates, and we now have global production as of 2019-2020 of 32 billion gallons. That’s a six-fold increase over 20 years and it started with policy-drivers,” Ausdal said.

Examples of policies driving ethanol include the U.S. RFS in 2005 and 2007, the European Union’s Energy Directive that became effective in 2009, Canada’s Renewable Fuel Regulation in 2010 and Brazil’s E25 mandate in 2013 followed by Brazil’s E27 mandate in 2015.

“The U.S. makes up a bulk of the global ethanol production. Going into 2021, the U.S. produces about 55% of all global ethanol production. So, as demand continues, as policy drives that demand, the U.S. will continue to be the primary supplier of ethanol,” Ausdal said.

Six months into the current marketing year, ethanol exports are estimated at nearly 715 million gallons, up 21 million gallons from 694 million a year ago.

There have been significant gains in Canada, 39 million gallons higher in the first half of the marketing year compared to a year ago.

“Canada is our largest, most reliable partner. We have a wonderful relationship with them. It’s a great example of what free trade can do between two countries and we continue to see that into the future,” Ausdal noted.

“We also have had some gains in Brazil (up 22 million gallons from a year ago), as well as Mexico (25 million gallons increase), and a couple of other countries to help offset those losses in China, India and Nigeria. Those losses are due to COVID restrictions, as well as changes in policy.

“Colombia has reduced its blend mandate as a result of a variety of domestic factors that affected the demand and therefore the exports, but we are seeing gains in other areas that are helping to offset those.

“Further demand drivers is Canada creating a renewable clean carbon fuel standard that’s to be implemented nationwide, India has retained its goal to reach nationwide E20 blending by 2025. India does not currently import fuel ethanol. It only imports industrial ethanol.”

Looking Ahead

Global ethanol demand is expected to grow following the COVID-19 setbacks.

According to an analysis by S&P Global Commodity Insights, global ethanol demand is projected to increase from 27 billion in 2022 to over 33 billion gallons by 2040.

“We’ll see regions in Europe to begin to transition to more advanced feedstocks and their blend rate will go up, and regions like Latin America, North America and globally trend upward, with the global blend rate increasing to around 8.7% of total fuel stock,” Ausdal said.

“Biofuels are consistently taking more of the conventional gasoline pool and coming in to supply that demand from those regions.”

She added USGC continues to make progress as policies in various countries become more ethanol friendly. USGC’s goal is having U.S. ethanol exports reach 4 billion gallons by 2025.

“We’re making progress,” Ausdal said. “Canada, Brazil, the European Union and South Korea are all areas that we put a lot of energy into and we’re seeing a lot of return.”

“Brazil recently lifted its 20% and then 18% and now zero 0% tariff on U.S. ethanol imports into the country. South Korea is utilizing industrial ethanol imports similar to India, no fuel right now, but we’re making progress in that market and also expanding the use of industrial ethanol at the same time,” she noted.

“This temporary removal of the Brazil tariff will drive some new developments. We’ll see what will happen in China as we’ve seen that market be a bit volatile over the last couple of years.”

Aviation Fuel

The newest expansion opportunity on the domestic side is corn-based ethanol is now an approved feedstock for Sustainable Aviation Fuel.

It’s currently being produced by Gevo, a Colorado-based renewable and advanced biofuels company, as well as LanzaJet, a Georgia refinery the produces SAF.

“We have optic agreements coming into place there. ADM recently signed a memorandum of understanding with Gevo to convert around 900 million gallons of ADM-produced ethanol which would translate into around 500 million gallons of SAF,” Ausdal said.

“That direct work is going to create a new market opportunity that we haven’t quite seen before in the industry into the next marketing year and definitely into 2030, 2050, and beyond.”