By Growth Energy Senior Vice President of Global Markets Craig Willis

Despite the barriers to trade continuing to limit potential growth in the global ethanol outlook, exports rebounded in March with a yearly record of over 140 million gallons (mg) exported. After a slower start for Brazil in the first two months of 2019, March saw a sharp increase in exports to the country – making up nearly the entirety of growth in exports from February. Overall, exports only increased by 26 mg from Feb. to March, while exports to Brazil alone increased by 29 mg for the month.  This indicates that, while smaller markets have taken on a relatively increased importance, volatility in the Brazilian market is still a pivotal factor in determining the global ethanol outlook.

As we predicted last month, exports to Brazil have bounced back from a slow start to the year, as a result of intermittent domestic production and continued high demand for ethanol fuel. With 65.6 mg in exports for the month (29 mg more than February), Brazil nearly doubled their monthly import average for the year and made up for marginal losses in other key markets like India, the Philippines, and South Korea, which saw a decline of 12.5 mg between them from Feb. to March.

Declining 12-month rolling exports continue to demonstrate how barriers to trade can affect potential future growth for U.S. ethanol exports. Rolling exports fell by 75 mg to a nine-month low of 1.56 billion gallons, as American producers are still unable to export to markets like China. Countries like China, India, and the European Union are all major markets with ongoing restrictions on imports of U.S. ethanol that could help offset slowdowns in exports to Brazil.

With Brazil largely recovered from the effects of heavy rains on production, and with low sugar prices driving a swing to ethanol among Brazilian mills, the need to reduce barriers to trade to minimize risk from volatility for American producers has never been higher. Coupled with a number of logistical issues within the United States, analysts and traders should expect ethanol exports in April and May to remain flat or fall slightly, as rail challenges and a chemical fire in the Houston Channel may both impact exports in the coming months.  Developing open and fair trade among new and established ethanol markets will, therefore, play a huge role in determining if 2019 experiences the record-breaking growth in exports we had in 2018.

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