US will need Brazil to meet ethanol mandates

05 March 2008 00:40  [Source: ICIS news]

SAO PAULO (ICIS news)--The US will need to rely on Brazilian ethanol imports to meet upcoming ethanol mandates set under the Renewable Fuels Standard (RFS), an ethanol broker said on Tuesday.

“It can be done, but they [the US] will have to import ethanol to make up for the 2.5bn gal increase this year,” the Brazilian broker said, referring to the 2008 goal.

Under the RFS, the US will be required to use 9bn gal of renewables in 2008. That figure will jump to 11.1bn gal in 2009 and increase annually until it reaches 36bn gal by 2022.

“Brazil could send as much as 1bn gal of ethanol to the US in 2008,” the broker said on the sidelines of an ethanol conference in Sao Paulo.

US production in 2007 was 6.48bn gal, according to the Renewable Fuels Association (RFA), which said demand last year was 6.84bn gal.

The notion that the US will have to resort to Brazilian imports in 2008 is also shared by some US producers, most of which are not usually warm to the idea of having large volumes of cheaper Brazilian ethanol enter the US market.

The US had 143 ethanol plants in operation in late February, with the capacity to produce 8.1bn gal/year of the biofuel, according to data from the RFA.

The RFA expects US capacity to jump to 13.4bn gal/year in 2008, with the construction of 57 plants and the expansion of seven facilities.

“The challenge for the US is not the ability to produce large quantities of ethanol, but rather produce it in a profitable way,” the broker said.

“It is all about the price of corn right now,” the source said, adding that increased US capacity means nothing if ethanol makers cannot afford to buy feedstock.

The US is the world’s top ethanol producer, but Brazil is the leading exporter. Brazil uses sugarcane to make ethanol, whereas production in the US is corn-based.

US corn prices have skyrocketed on the back of surging ethanol demand.

The US Department of Agriculture (USDA) expects corn prices to jump to a range of $3.75-4.25/bushel in the 2007-2008 crop year, a 30% increase from $3.04/bushel as assessed by USDA for 2006-2007.

US ethanol prices in Chicago were assessed at $2.36-2.40/gal in the week ended 29 February, largely unchanged from $2.35-2.43/gal one year earlier, according to global chemical market intelligence service ICIS pricing.

For more on ethanol visit ICIS chemical intelligence

Bookmark Simon Robinson’s Big Biofuels Blog for some independent thinking on biofuels

 

 

By: William Lemos
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