If You Build It…

FROM THE NOVEMBER ISSUE: A preview of the magazine from Editor in Chief Tom Bryan. This month, we spotlight the market opportunity in Mexico, the supply chain, infrastructure capabilities and on-site rail expansions.
By Tom Bryan | October 19, 2017

Our industry’s immediate growth objective is to make E15 ubiquitous at the pump—like E10 already is—creating a strong market pull for next-generation ethanol. That plan, however, will not materialize quickly. After all, it took a quarter century for E10 to become a pervasive ethanol-gas blend, so it will almost certainly take a decade for E15 to do the same. As this long game plays out, American ethanol producers need exports—already a billion-plus-gallon market—to steady prices and production.

Lately, however, our top export markets have been anything but stable. Brazil’s mid-year decision to drop a 20 percent tariff on U.S. ethanol (anything beyond 158 million gallons) entering the country has stifled a good run. And that came after China levied an even heftier duty on our product. So, it appears that our current strategy is not so much to grow the export market but to maintain it with new buyers in new places. As we learn in our cover story, “How to Build a Market,” on page 16, Mexico represents our best and nearest opportunity to make that happen. In fact, we report that Mexican ethanol demand, alone, could be as high as 1.2 billion gallons now that E10 is allowed everywhere in the country except within the nation’s three largest cities. Aside from those metropolitan restrictions, and a serious lack of ethanol infrastructure in Mexico, it’s a market with huge potential.

Mexico’s ethanol usage is where the U.S. was 15 or 20 years ago, so it’s fitting that E10 is being introduced south of the border while E15 is emerging here. In “Minnesota Middleman,” on page 24, we learn how one family-owned fuel distribution company in Minnesota is playing a role in E15’s supply chain. Waterford Oil Co. has found a profitable niche offering tailored biofuel blends to its retail and agricultural customers, making up batches of E15, E30 and various biodiesel blends virtually on demand.

Over time, as E15 becomes common at the pump, scores of U.S. fuel terminals will need to be upgraded to receive and store greater quantities of ethanol. However, we find out in “Quick and Nimble,” on page 30, that the situation isn’t dire. Experts say three-quarters of the nation’s terminals would be able to quickly adapt to an E15 marketplace. In other cases, rail-to-truck transloading could compensate while terminals upgrade.

Finally, be sure to read “Loop Track Comeback,” on page 36, which offers insight on the uptick in the construction of on-site rail loops at ethanol plants. These multi-track rail loops—configured in a variety of ways—allow ethanol plants to switch back and forth between manifest shipments and unit trains, providing significant efficiency gains and improved market access.

Author: Tom Bryan
President & Editor in Chief