Brazil Emerges as Biggest Importer of U.S. Ethanol

Brazil’s continued growth in soybean and corn production has been big news in recent years, but other agriculture issues in that country also influence global trade, including ethanol.

In 2016, Brazil surpassed Canada as the top destination for U.S. ethanol exports, reaching 267 million gallons. Canada received 259.3 million gallons from the U.S. China was third at 179.2 million gallons.

A year earlier, Brazil imported 112.6 million gallons of ethanol from the U.S.

A couple of factors are driving this dramatic growth. Brazil’s main ethanol feedstock is sugarcane, but relatively high global sugar prices in 2016 encouraged more sugar production over sugarcane ethanol production. Corn ethanol exports to Brazil were further encouraged by that country’s 27 percent fuel ethanol mandate and its zero import tariff for ethanol, which is in effect through 2021.

Pedro Dejneka, a partner at Chicago-based MD Commodities, is based in Brazil and recently shared his thoughts during an Allendale-hosted ag leaders webinar.

“It all comes down to an economic choice as to why they’re processing sugar and not ethanol,” he said, “but right now there’s very little incentive. Brazil is about ready to harvest a nice sugar cane crop again. Sugar prices are far from the highs we’ve seen in the last 12 months, but also far from the lows. I think that’s going to re-balance itself.”

Brazil is in the early stage of shifting away from sugarcane and toward corn in its ethanol production, which could diminish what it imports from the U.S.

The country is investing in more corn ethanol production that could replace U.S. exports to that country. Dejneka describes that effort as in its “infancy” but said it is a natural direction for the country.

“We’re producing so much corn in Brazil, and that corn has got to go somewhere,” he said.

“So, as far as the potential for the U.S. increasing corn exports to Brazil in the years to come, I would be cautious with that,” Dejneka said. “I’m not an ethanol expert, but it’s something we have to pay attention to. Brazil’s got too much sugar right now, they’ve got too much corn, they’ve got to find a way to burn it, and they’re going to burn it in ethanol.”

Source: AgriNews