Ethanol’s Global Growth

FROM THE MARCH ISSUE: North and South America, as well as Asia,are strong markets for ethanol.
By Craig Willis | February 20, 2019

While trade disputes and regulatory challenges have had a significant impact on demand, U.S. biofuels have still seen unprecedented popularity on the global front in recent years. In fact, ethanol exports reached record highs in 2018—expected to be the most successful calendar year for biofuels exports in history. With 2018 export figures—reported through October—reaching a record 1.41 billion gallons, we have already eclipsed the 1.37 billion gallons exported in 2017.

Just last year, my colleagues and I logged 19 international trips to promote trade and forge relationships with key industry officials and stakeholders. We also submitted comments on five separate biofuels-related regulations abroad in places like Canada, the European Union, the United Kingdom and Japan. As we look to 2019, one of our key priorities at Growth Energy is to ensure that American producers are well-positioned to take advantage of burgeoning markets as countries seek to leverage ethanol’s environmental and economic benefits.

Growth in the Americas
In 2018, North and South America made up over half of our total ethanol exports at 840 million gallons. The bulk of these exports stemmed from large markets in Canada and Brazil, with Brazil alone making up over half of the region’s total intake. Export success in these primary markets is a result of the blending standards they have in place, with Brazil having the highest standard globally at a 27 percent minimum blend and reaching an overall blend rate of 47.8 percent.

Canada has also consistently committed to blending biofuels to keep fuel prices low and meet its environmental goals, and last year considered two major pieces of biofuels-related legislation. In particular, the province of Ontario, historically a leader among Canadian provinces and the country’s largest transportation market, is at the leading edge for biofuels in the country and recently announced a commitment to implement an E15 requirement by 2025 to meet its emissions reduction goals. Over the years, Canada has remained a consistent importer of U.S. ethanol and could therefore see even higher growth in exports in the coming years to fulfil its new blending requirements.

The steady intake of U.S.-produced ethanol by North and South America reflects the growing popularity among foreign governments and consumers to make the move toward more affordable and environmentally friendly biofuels. While Brazil’s ethanol demand tends to be more volatile because of its domestic sugar and ethanol industries, the consistency we see from Canada provides a level of certainty for U.S. growers and producers as they forecast the years ahead.

Potential in the East
We are also seeing tremendous export potential and growth outside of the Americas. Asia ranks second in terms of exports, importing 452 million gallons, and many countries within Asia have begun implementing their own biofuels legislation.

China, in particular, is in the process of implementing a nationwide biofuels requirement that aims to achieve a 10 percent blend rate for ethanol by 2020. At the start of 2018, China was on pace to be a regional leader in ethanol imports, importing over 52 million gallons in just the months of February and March. By comparison, in 2016, American producers exported nearly 200 million gallons to China alone. But trade tensions between the two countries have meant a near halt in exports to China in 2018, depriving American producers and farmers from access to a key export market and slowing the pace at which China can meet its climate goals. Trade negotiations and disputes must be resolved in a timely manner, not only to meet China’s needs, but also to open back up a critical market for U.S. agriculture.

Despite significant setbacks, the global ethanol export outlook reached unprecedented heights in 2018 and should only continue growing in 2019, as more countries begin to blend ethanol into their fuel supplies. The untapped potential across the Americas, Asia and other continents is tremendous. By building biofuels markets abroad and forging strong trade relations, our industry can ensure stable markets for America’s producers and farmers. As we head into 2019, Growth Energy remains committed to supporting burgeoning ethanol markets to promote the benefits of biofuels both at home and abroad.

Author: Craig Willis
Senior Vice President, Growth Energy