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US ethanol exports fall in 2019

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Hydrocarbon Engineering,

The US exported 96 000 bpd of fuel ethanol in 2019, the first annual drop in US ethanol exports since 2015. Despite the decrease, total exports remained at the second-highest level on record. The US exported more fuel ethanol than it imported in 2019, the 10th year in a row as a net exporter.

US fuel ethanol exports fell by 14% in 2019 even though the number of export destinations increased from 34 destinations in 2018 to 39 destinations in 2019. Nearly half of all ethanol was shipped to Brazil and Canada, despite these countries decreasing their imports of US ethanol by 34% and 5%, respectively.

Brazil, the world’s second-largest producer and consumer of fuel ethanol, decreased imports of US ethanol for the first year since 2015, dropping to 22 000 bpd in 2019 but still accounting for nearly one-quarter of all US ethanol exports. Ethanol consumption in Brazil is driven largely by a fuel ethanol blending requirement, which is currently set at 27%, and demand for hydrous ethanol (E100) that competes with traditional gasoline blends.

Ethanol in Brazil is primarily produced from sugarcane, and as a result, it is seasonally driven by the sugarcane harvest period from May through October. Brazilian imports of US ethanol typically peak in between harvest seasons.

The US and Brazil are trade partners for fuel ethanol, and the US also imports Brazilian fuel ethanol, especially during its sugarcane harvest season. The US substantially increased its sugarcane ethanol imports in 2019 to a total of 13 000 bpd, up 9000 bpd from 2018 levels, all of which were sourced from Brazil. US ethanol imports from Brazil all entered the US in the West Coast region (Petroleum Administration for Defense District 5), likely driven by increasing standards in California’s Low Carbon Fuel Standard (LCFS) and the LCFS’s favourable carbon intensity scores for Brazilian sugarcane ethanol relative to domestic corn ethanol sources.

In early 2018, between sugarcane harvest seasons for Brazil’s domestic ethanol industry, substantial price discounts of US ethanol relative to Brazil’s ethanol led to monthly record-high levels of US fuel ethanol exports to Brazil. In early 2019, some of those inter-period harvest price advantages for US ethanol exports to Brazil remained, although at a lower level compared with 2018. US exports to Brazil reached nearly 3 million bbl in the first three months of 2019 (equivalent to 37 000 bpd), which was 40% lower than the record level set in 1Q18.

US ethanol exports remained elevated despite Brazil’s extension of the 20% tariff levied on US ethanol (for volumes higher than the equivalent of 1 million bbl) through September 2019. The tariff quota was again increased in September 2019 to allow for a limit of 750 million l (about 5 million bbl) per year through 2020.

Canada remained the second-largest destination for US ethanol, importing nearly 22 000 bpd in 2019, largely unchanged from the volumes imported during the past few years. Canadian demand for US fuel ethanol is driven by regional ethanol requirements for gasoline across Canadian provinces, which range between 5.0% and 8.5%.

The third-largest destination in 2019 for US ethanol was again India at 12 000 bpd, followed by South Korea and Colombia. The remaining 34 countries received approximately 30 000 bpd of US ethanol exports.

Principal contributors: Sean Hill, Estella Shi

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