Brazil has the largest fleet of cars converted to use the highest blends of ethanol, and the government is reportedly debating whether to remove duties on imports of the US-sourced fuel. As is usual in many countries, the Agriculture Ministry opposes such a move, but others in the government see it as a strategic offering toward a larger bilateral trade agreement.
The US is already the largest supplier of ethanol to Brazil (Figure 1); and when the current 600 million litre import quota expires at the end of August, the 20% duty would still leave American ethanol competitively entering the market. Shipments of biofuel have been a growing market, and the trade war with China has made it more important as an outlet for surplus US agricultural production.
Canada is the second-largest market for US ethanol, but it has been sufficiently saturated. Other large and growing markets include India and Europe, although market access can be an issue. There are also dozens of smaller markets, but the trend in many is to adopt ethanol use. However, a number of them do not have large, inexpensive piles of feedstock like the US.
As corn prices have come down, ethanol is amply competitive with gasoline, while concurrently providing a cleaner burning result when blended. This latter point is particularly a focus for growth in the large cities of Asia.
Some analysts predict an animal protein shock in 2020 that will help consume the current surplus of corn. In the meantime, though, there are both economic and environmental factors driving consumption of the commodity.
Gary Blumenthal
Source: Ag Perspective, Aug 6, 2019
