US ethanol exports on pace for record year, fueled by low prices and increased opportunity overseas

US fuel ethanol exports have surged to 29.598 million barrels in the first eight months of 2024, 34.92% higher than the same period in 2023, Energy Information Administration data showed Nov. 19.

So far in 2024, US ethanol exports have been restored to prepandemic levels. The US exported a record-high of 40.976 million barrels in the full year of 2018. Through Aug. 31 of that year, however, only 27.707 million barrels of exports were reported – which puts 2024 on pace to surpass the previous all-time high set in 2018.

Low prices for US product along with a steady international appetite for biofuels has fueled the growth of the US ethanol export program in 2024. Additionally, Brazilian ethanol available for export has declined significantly in 2024 as domestic hydrous E100 demand has grown to multiyear highs amid a spike in overall fuel consumption and favorable price ratios to gasoline – opening the door for increased overseas export flows from the US.

Lower US ethanol prices, strengthening of Brazil's domestic market

Following a record corn crop harvest in 2023 and the subsequent fall in feedstock corn prices, US ethanol has become increasingly less expensive and more available for countries with mandated ethanol usage standards. According to Platts assessments, the US Chicago ethanol benchmark has averaged 23.84% lower compared to 2023 as of Nov. 18. Relative to the five-year average, the benchmark is down 12.77% as of Nov. 18. Meanwhile, US ethanol stocks have averaged 1.064 million barrels, or 4.60%, higher in 2024 compared to 2023, according to EIA data.

In addition to US prices trending lower, importing countries have sought more US product as Brazil's domestic ethanol market has strengthened. Brazil, the second-largest exporter of ethanol, has seen a shift in drivers' preference for hydrous E100 at retail pumps since late 2023, mostly due to favorable discounts under domestic gasoline, which has led to a spike in domestic ethanol demand and a decrease in product leaving the country.

Through September, retail ethanol sales in Brazil have totaled 16.036 million cu m, or an average of 331,786 b/d, up 44% compared to the same period in 2023, according to Brazil's National Petroleum Agency. Meanwhile, according to UNICA, the Brazilian Sugarcane Industry Association, Brazilian ethanol exports have totaled 1.6 billion liters in 2024 through October, down 16.66% compared to the same period in 2023.

"With domestic demand booming as much as it is, exporting ethanol has not been a priority for a while. Besides, a closed arbitrage window for much of the year is also restricting sellers' interest in overseas markets," an analyst at a São Paulo-based trading company told Commodity Insights. "There is still the trusty vessel leaving Brazil for South Korea, but those constant flows directed to Europe we have seen in past years are not there anymore."

Platts assessed hydrous E100 ethanol ex-mill Ribeirão at Real 3,130/cu m on Nov. 18, up 21.79% compared to the same time last year.

As US export demand has risen alongside decreased Brazilian outflows, US ethanol production has reached all-time highs. US ethanol production has averaged 1.046 million b/d as of the week ended Nov. 8, compared to a weekly average of 1.024 million b/d in 2023, EIA data showed. The weekly production average hit an all-time-high of 1.113 million b/d during the week ended Nov. 8.

The surge in export flows has helped ease the impacts of large corn balances and healthy production figures, preventing prolonged periods of oversupplied markets and supporting margin health. According to Platts, ethanol cash margins have maintained positive for nearly the entirety of 2024 but have hovered near flat since the start of October.

A market source said that margins have remained in the "green" largely due to the spike in overseas demand, drawing from domestic inventories, and keeping supply and demand dynamics mostly balanced.

Export destination breakdown

Canada has remained the largest foreign market for US ethanol, with 10.475 million barrels, or 35.39%, of total ethanol exports destined for the country through Aug. 31. In 2023, however, nearly 45% of total US ethanol exports were sent to Canada. Despite the lower percentage of Canada-destined exports, growth in overseas exports has more than compensated for the reduction in Canadian flows.

Through August, more US ethanol exports have been sent to the UK, India, and Colombia than were sent to each of the respective locations during the entirety of 2023. Meanwhile, exports to secondary markets such as South Korea, Mexico and the Netherlands have held mostly on pace with prior years.

The UK has received 3.968 million barrels, or 13.41%, of US ethanol exports – compared to 3.811 million barrels, or 11.17%, during the entirety of 2023. Meanwhile, India has seen the largest percentage increase of US ethanol exports -- as 2.929 million barrels, or 9.90%, of exports have been sent to India through August. In comparison, only 2.209 million barrels, or 6.47%, were sent in 2023.

Notably, US ethanol flows to Colombia have surged to 7% of total export volumes in 2024, up from just 1% in 2022. Through Aug. 31, the US has exported 2.090 million barrels of ethanol to Colombia, compared to 321,000 barrels for the entirety of 2022. In February, the Colombian government restored its E10 mandate after fluctuating between blend rates of 3%-7% in 2023, of which a significant portion has been filled by US product.