While U.S. ethanol exports are up by three percent year-over-year according to new data from the U.S. Department of Agriculture (USDA), the outbreak of COVID-19 will have structural impacts on demand for the rest of 2020. The U.S. Grains Council (USGC) is working to keep end-users around the world informed on the status of the U.S. ethanol industry as the pandemic continues to develop.
USDA reported last week that U.S. ethanol exports increased slightly year-over-year to 812 million gallons (288 million bushels in corn equivalent) for the first six months of the marketing year (Sept. 2019-Feb. 2020). Brazil remained the top export destination at 201 million gallons (71.3 million bushels in corn equivalent), despite a small decline due to the restructuring of Brazil’s tariff rate quota (TRQ) and a strengthening U.S. dollar. The European Union had a notable 28 percent increase from 2018/2019 imports at 79 million gallons (28 million bushels in corn equivalent).
These data points were not able to take into account the still-developing impacts of COVID-19 and oil production disputes, which have led to deep decreases in demand for gasoline and shifts in the relationship between oil and ethanol prices.
“The world is going through an unprecedented level of disruption, where every individual and industry is impacted by global restrictions set in place to reduce new cases of COVID-19,” said Brian Healy, USGC director of global ethanol market development. “Travel bans have an impact on fuel demand in the near term, but the impacts of job losses, middle-class growth stagnation and a readjustment period from social distancing will continue to put downward pressure on demand throughout the year.”
Compounding the overall demand decline, the lack of an agreement on crude production between the Organization of the Petroleum Exporting Countries (OPEC) and Russia sent shock waves across global energy markets and is contributing to shortages in a critical component to the industry - storage.
To date, U.S. ethanol weekly ending stocks are at a record high, and the United States remains positioned to supply customers globally. While keeping buyers aware of supply availability, USGC continues to work to develop markets focused on core aspects of expanded ethanol use, including environmental and human health benefits.
“During the second quarter of 2020, in response to reducing further spread of COVID-19, the world will experience the sharpest decline in global emissions since the Great Recession,” Healy said. “As the world returns to normal economic activity and emissions-as-usual, the economic cost of abatement over this period will be researched for years to come, providing a pathway for discussion on environmental solutions for the transport sector that are available today, like expanded ethanol use.”
Discussion about ethanol used for industrial purposes, namely to support human health through expanded use of hand sanitizers, has peaked as governments look to meet the drastic uptick in demand needs. Ethanol producers globally are seeking proper permitting and certification to meet those demands.
Throughout the COVID-19 pandemic, USGC is working diligently to engage directly with international stakeholders to convey the continued availability of U.S. ethanol supply; on uses for ethanol beyond the fuel market including human health benefits and environmental sustainability; and for technical outreach and related questions about infrastructure, blending, pricing and policy development.
As travel restrictions ease, USGC remains positioned to follow up on these information requests with in-country engagement and to resume strategic programming that supports the expanded use of ethanol in a post COVID-19 world.
