U.S. imports of sugarcane ethanol from Brazil fell by 40% last year, to 242 million gallons. Because Brazil is the largest source of ethanol imports into the United States, this drop led the United States to be a net exporter of the product for the year. Export volumes of corn-based ethanol to Brazil declined, but were more than offset by higher export volumes to Canada and a number of other countries. Although the net level has varied from month to month, since 2011 the United States has both imported ethanol from and exported ethanol to Brazil.
Ethanol is primarily used as a blending component in the production of motor gasoline. The United States and Brazil are the two largest producers and exporters of ethanol in the world, with ethanol being produced from corn feedstocks in the United States and sugarcane in Brazil. Starting in 2010, growing corn harvests and limited growth in the domestic ethanol market led the United States to become a net exporter of ethanol and the world's leading supplier. At the same time, decreased sugarcane harvests in Brazil led to significant reductions in Brazilian ethanol output and a reversal in traditional ethanol trade patterns, as U.S. volumes began entering Brazil to meet domestic demand.
Brazilian ethanol production recovered in 2012. This reduced Brazil's need for U.S. ethanol imports, while Brazil exported significant volumes to the United States, largely due to growing U.S. Renewable Fuel Standard (RFS) targets. In addition to the RFS, the California Low Carbon Fuel Standard (LCFS) creates an incentive to import sugar-based ethanol from Brazil because of its lower carbon intensity, seen in imports of ethanol into the West Coast from Brazil.
Brazilian ethanol output typically peaks during the fourth quarter (October-December) of each year. In the fourth quarter of 2013, Brazil had a record sugarcane harvest and increased ethanol production. However, U.S. imports of ethanol from Brazil fell by 95% compared with the fourth quarter of 2012, when drought in the United States pushed domestic production to record low levels. Another major driver was the U.S. Environmental Protection Agency's (EPA) announcement of proposed reductions to 2014 RFS, as well as growing volumes of biomass-based diesel imports.
The remaining volumes of ethanol imported into the United States from other countries came from Canada or countries that have facilities to convert hydrous sugarcane ethanol originally produced in Brazil to anhydrous ethanol for the U.S market. U.S. ethanol imports enter the country primarily on either the East Coast (PADD 1) or West Coast (PADD 5). West Coast imports of ethanol averaged 30% of total U.S. imports. Despite the geographic disadvantage of shipping Brazilian ethanol to the West Coast compared to other U.S. regions, imports into PADD 5 continued to benefit from the advantage that sugarcane ethanol provides in meeting the California LCFS. The California LCFS regulates the carbon intensity (CI) of gasoline and diesel fuels sold in the state. Depending on the production process, Brazilian sugarcane ethanol has among the lowest CI values of any fuels currently available for meeting the LCFS target.
In 2013, the United States imported 306 million gallons and exported 622 million gallons of ethanol, the latter of which was the third highest annual total on record. The United States remained the world's largest supplier of fuel ethanol, despite high corn prices and increased domestic demand. Canada received more than half of all U.S. ethanol exports, with its total reaching 325 million gallons last year. U.S. exports to Brazil fell to 33 million gallons, as increasing volumes of Brazilian ethanol were available for domestic consumption. U.S. ethanol exports made their way increasingly to other countries in Latin America, as well as Europe, the Middle East, and new destinations in Asia and Africa. U.S. ethanol was exported for the first time to the Philippines and Tunisia, and large volumes of U.S. ethanol were sent to the United Arab Emirates, Mexico, Peru, and Western Europe.
The trend in 2014 is for the United States to remain a strong net exporter of ethanol, with the potential for substantially larger levels of exports, given the recent abundant corn crop and EPA's proposed reduction in domestic RFS targets. While favorable blending economics are likely to drive domestic ethanol demand, the United States is likely to remain the world's leading ethanol supplier. U.S. ethanol import volumes in 2014 will likely be contingent on a combination of Brazilian sugarcane yields, final advanced biofuels RFS targets, and imported volumes of competing advanced biofuels, such as renewable diesel.
Principal contributor: Sean Hill