Ethanol’s outlet opportunities

The February issue of EPM is now online, including a story about growing export markets. Tom Bryan writes that today's total ethanol exports adds up to the amount of ethanol produced by all the ethanol plants in Ohio and Missouri combined.
By Tom Bryan | January 22, 2016

The marked rise of U.S. ethanol exports, particularly over the past five years, continues to be one of the industry’s top stories, and also one of the brightest. The roughly 850 million gallons of ethanol our nation is expected to export in 2015, while just 6 percent of total domestic production, is a big difference maker in the marketplace. In addition to having a stabilizing effect on the price of ethanol, today’s total export volume represents, for example, the amount of ethanol produced by all the ethanol plants in Ohio and Missouri combined. Without those foreign markets, who knows?  

As explained in our story, “Markets for Liquid Corn,” U.S. ethanol exports, as a dollar figure, have risen from essentially nothing a decade ago to $2 billion today. In fact, EPM Managing Editor Holly Jessen reports that the United States’ market share of world ethanol exports now stands at 50 percent, twice that of historical frontrunner, Brazil.

America’s ascent to ethanol exports dominance can be attributed to several factors including readiness, capacity and incidental market dynamics. First, the global demand for octane is rising while the price of U.S. ethanol—and corn—is relatively low. Corn, in fact, is expected to stay cheaper than sugar, Brazil’s main feedstock, for years to come. That bodes well for the growth of U.S. exports in the near term. Secondly, the rise of U.S. ethanol exports absolutely must be attributed to the sheer diligence and swift action of the industry itself. As Jessen reports, the U.S. ethanol industry, with lots of help from the U.S. Grains Council and federal agencies like the USDA and U.S. Commerce Department, has been originating and building worldwide markets for its product out of a real sense of necessity. The industry needed, and very much still needs, outlets for its spare capacity in order to stabilize prices and keep the lights on at every operable plant in America. Exports, particularly at today’s levels, provide exactly that channel.

Fortuitously, or maybe by design, the market growth we’re seeing is occurring with geographic diversity. While ethanol exports remain strong in proven destinations like Canada and Brazil, budding customer bases in South America, Southeast Asia and China—the No. 2 gasoline market in the world—are being cultivated in earnest. Particularly impressive, and perhaps a little confounding, is that U.S. ethanol exports are on the rise despite the fact that ethanol has been trading above the price of gasoline for about a year. That’s probably a reflection of budding global demand for octane, but also the intrepid work of America’s globetrotting ethanol ambassadors.

Author: Tom Bryan
President & Editor in Chief
tbryan@bbiinternational.com