European fuel ethanol prices are backwardated throughout the fourth quarter because of expectations that supply will lengthen by the first quarter of 2013, due to increased capacity.
European demand is likely to continue to decrease throughout the remainder of the fourth quarter, which is usual during colder weather as consumers tend to drive less.
Market conditions will remain uncertain for the foreseeable future because of the publication of European Commission biofuels proposals, which seek to cap the contribution of food crop-based biofuels to EU biofuel targets at 5%.
In the US, calls to waive the Renewable Fuel Standard – in reaction to high corn costs following a severe drought – were rejected by the Environmental Protection Agency (EPA). The EPA said that waiving the mandate would only reduce corn prices by 1%, and would have little effect on household energy costs.
Despite being the world’s largest ethanol producer, the US is likely to continue to import sugarcane ethanol from Brazil to fulfil its advanced biofuels mandate, as there is little commercial production of second-generation biofuels in the US.
Updated to mid-November 2012