By Growth Energy Senior Vice President of Global Markets Craig Willis
Last month, we discussed the possibility that logistical hurdles within the United States could continue to impact ethanol exports in April and May, however exports bounced back in April with over 150 million gallons (mg) exported for the month – the highest this year. It is important to note that this may only be a brief window of recovery before worsening on the year, as the full impacts of flooding in the Midwest and a short corn crop across the U.S. are felt.
From a longer-term perspective, 12-month rolling exports did finally show some stability this month despite falling slightly from March, coming to 1.55 billion gallons on the year. Although it remains to be seen how further trade tensions will resolve, major markets in Brazil, India, and Canada have historically driven long-term stability. Ongoing trade tensions in numerous countries and the rise of production and licensing issues in India may negatively impact that stability however.
The top export market for U.S. ethanol exports in April was Brazil, with ethanol exports reaching 40 mg. This was down from 65 mg in March, but, despite this slowdown, Brazil continues to lead export markets on the year with nearly double the closest competitor in Canada. However, overall export growth in April may be shorted lived as predictions have cast India, the runner-up export destination, as potentially overtaking Brazil in sugar production — driving down global sugar prices and encouraging ethanol production within the country. Low sugar prices and increased ethanol production in such a major market could have wide-ranging impacts on the global ethanol outlook – including encouraging Brazilian sugar mills to continue prioritizing ethanol over sweeteners.
In the U.S., corn crop issues, natural disasters and transportation issues, combined with low sugar prices and higher ethanol production globally, mean that we may face a downturn in exports throughout the year. These factors indicate the remainder of 2019 is on track to decline from the historic success that we have seen over the past three years. Stay tuned for more next month for an update on ethanol exports as we head into summer and whether the global ethanol outlook can bounce back throughout the year.
Follow Craig on his LinkedIn profile for the latest on the global ethanol outlook, here.