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U.S. ethanol plants are operating near full capacity but constraints limit growth

Friday, January 5, 2018

The number of U.S. ethanol plants more than quadrupled since 1999, as demand for ethanol has increased. This growth in the number of plants is driven mainly by the Renewable Fuel Standard program, which was first enacted in 2005. The initial increase in plant numbers after 2005 led to reduced capacity utilization with some plants not producing at their full potential. Since 2011, the number of new plants has generally remained level, allowing for production growth to be achieved through maximizing present capacity utilization. As of 2016, existing plants were operating at roughly 97 percent of total capacity, translating to over 15 billion gallons of ethanol produced. While such a high number might normally signal demand for new plants, limitations on the amount of ethanol that can be blended with gasoline in existing vehicles is effectively limited to 10 percent. Combined with lower gasoline consumption due to greater vehicle efficiency and lower miles driven, further domestic ethanol demand has been constrained. Because of these constraints, additional ethanol production is primarily intended for export markets and is sensitive to competition with the price of gasoline, which has fallen significantly since 2014. This chart appears in the ERS report Global Ethanol Mandates: Opportunities for U.S. Exports of Ethanol and DDGS, released in October 2017.

Global ethanol production still largely driven by the United States and Brazil

Thursday, November 2, 2017

Ethanol production has increased rapidly over the last two decades, making ethanol an important component of today’s transportation fuels. From 2001 to 2016, global ethanol production grew 400 percent, from 5 billion gallons to almost 27 billion gallons. Historically, the United States, Brazil, and the European Union (EU) were the world’s major ethanol markets. In the United States alone, ethanol makes up 10 percent of total gasoline use. Government blending mandates (requirements to add a specified percentage of ethanol to gasoline) have helped fuel increases in ethanol production and consumption worldwide. Despite the global increase in ethanol production, however, many countries do not meet their mandates. Of the ethanol-producing countries outside of the United States, Brazil, and the EU, five countries—Argentina, Canada, China, India, and Thailand—account for 80 percent of the remaining production. This chart appears in the ERS report, "Global Ethanol Mandates: Opportunities for U.S. Exports of Ethanol and DDGS," released in October 2017.

Tight fuel ethanol supplies in Brazil boost imports from the United States

Thursday, April 27, 2017

U.S. fuel ethanol exports are up significantly for the 2016/17 marketing year, primarily driven by increased exports to Brazil. The change is related to an increase in Brazil’s sugar prices, which is due to strong international demand for the country’s sugar exports. As a result, the country’s sugarcane refiners have shifted processing capacity from ethanol to sugar. Since Brazil has a 27-percent ethanol inclusion mandate for gasoline, the decline in output has left fuel refiners short of supplies. This has caused an increase in ethanol shipments from the United States, where corn supply is abundant, making up for Brazil’s shortfall. U.S. ethanol shipments to Brazil began rising in October 2016, jumping 138 percent that month. The pace has continued at an elevated level through February 2017, the latest month for which trade data are available. From October 2016 through February 2017, fuel ethanol shipments to Brazil surged 547 percent, compared with the same period a year earlier. In addition, U.S. shipments to the world rose 65 percent and exports to Canada, also a major buyer, rose by 57 percent. This chart appears in the ERS Feed Outlook report released in April 2017.

U.S. ethanol use continues to grow while prices reach decade lows

Tuesday, December 20, 2016

In the United States, production of ethanol is largely tied to federally mandated renewable fuel standards contained in the Energy Independence and Security Act of 2007 and the prior Energy Policy Act of 2005. The former calls for 36 billion gallons of renewable fuels in production by 2022, but requires that an increasing share – 21 billion gallons – of the mandate be met with advanced biofuels, which are biofuels produced from feedstocks other than corn starch (and with 50 percent lower-lifecycle greenhouse gas emissions than petroleum fuels). Corn based ethanol production has begun leveling off since 2010 as production nears the cap for non-advanced biofuels. As production has leveled off, the average annual price of ethanol has declined. The average ethanol price in 2016 was $1.55 per gallon, the lowest price since 2003. While the price of ethanol is also impacted by unrelated movements in the corn market, slowing growth of ethanol production has impacted the prices of both commodities. The data in this chart is drawn from the ERS U.S. Bioenergy Statistics data product updated in December 2016.

Rural counties lead growth in U.S. natural gas production

Thursday, September 1, 2016

From 2000 to 2011, onshore gross withdrawals of natural gas in the lower 48 States increased by about 47 percent, reaching historic highs in every year after 2006. The most rural of counties?those that are outside the commuting area of a metropolitan area and lack a core urban area of at least 10,000 people, so called ?nonmetro noncore??accounted for nearly half of the growth in gas production. This growth is driven by nonmetro noncore gas-producing areas in the country?s midsection. Several metropolitan areas, notably the Fort Worth area in Texas, also contributed to the growth in natural gas production. Nonmetro micropolitan counties (nonmetro counties with small cities) as a whole accounted for only about 13 percent of the growth in natural gas production from 2000 to 2011. This chart and the underlying data (which include data on natural gas and oil production, as well as indicators of the degree of rurality) are found in the ERS data product, County-level Oil and Gas Production in the U.S., released in January 2014.

U.S. corn use in ethanol now tracks gasoline consumption

Thursday, September 1, 2016

The rapid growth in use of U.S. corn to produce ethanol that occurred during the 2000s has slowed sharply since 2010, and now tracks with U.S. gasoline consumption.? Lower U.S. gasoline use since 2007, combined with market constraints to increased blending of biofuel, now limits the demand for corn-based ethanol.? Nearly all retail gasoline sold in the United States is a 10-percent ethanol blend (E10). Although ethanol demand now plays a more limited role in driving growth in U.S. corn demand, it continues to account for a large share of total U.S. corn use, averaging 39 percent since 2010.? This chart is based on data found in ERS's Feed Grains Database and U.S. Bioenergy Statistics. For more analysis, see Feed Outlook: October 2014.

August to January is becoming the most active period for Brazil's corn exports

Thursday, September 1, 2016

Corn is Brazil's second largest crop (after soybeans), accounting for 20 percent of planted area, and Brazil is the world's second largest corn exporter, behind the United States. Due to a favorable climate and long growing season, double-cropping is possible in much of the country, and the majority of corn in Brazil is harvested as a second crop planted after soybeans. Brazil tends to use most of its first-crop corn (harvested primarily during February-April) domestically because it is grown near the poultry and pork enterprises in the South, and the transportation system is focused on moving soybeans into global markets. But second-crop corn is harvested during June-August just as Brazil's peak soybean export period ends, freeing up port capacity and transportation resources to move corn into export markets. Second-crop corn production in Brazil has expanded rapidly over the past 5 years, and over the same period the seasonal pattern of Brazil's corn exports has shifted such that a much larger portion now enters export markets from August to January, months when harvesting begins and supplies peak in the United States. This chart is from the ERS report, Brazil's Corn Industry and the Effect on the Seasonal Pattern of U.S. Corn Exports, released June 15, 2016.

Brazil is now both an exporter and importer of ethanol

Thursday, September 1, 2016

Brazil had historically been the world?s largest net exporter of ethanol, but rising sugar prices (sugar is Brazil?s primary ethanol feedstock) and growing demand for domestic ethanol consumption led to lower ethanol exports, particularly in 2009 and 2010. In 2010 the Brazilian Government lifted a tariff on ethanol imports through the end of 2015, leading to the country?s first imports of ethanol. Imports grew rapidly in 2011 and resulted in Brazil being a net ethanol importer?by a small margin?for the only time in its history. Ethanol exports recovered in 2012 but have declined each year since, while imports remain an important source of supply. Since 2010, the United States?now the world?s largest ethanol exporter?has been the largest supplier of ethanol to Brazil, followed distantly by the EU. This chart is based on the ERS report, Biofuel Use in International Markets: the Importance of Trade.

A growing share of U.S. corn is exported as ethanol byproducts

Thursday, September 1, 2016

U.S. exports of distillers dried grains with solubles (DDGS)?a common byproduct of corn ethanol production?have grown from nearly zero in 2005 to as high as 12 million metric tons in the 2013/14 marketing year (September/August), with 10 million metric tons forecast for export in the 2015 marketing year. This increase in exports reflects the expansion in ethanol production that occurred over this same period, rising from just under 4 billion gallons in 2005 to more than 14 billion gallons in 2014. While U.S. corn exports still exceed the volume of DDGS exported, these markets are linked because each ton of corn processed into ethanol produces just under a third of a ton of DDGS. Ethanol production accounted for 38 percent of U.S. corn use in 2014/15, while exports were less than 14 percent, but DDGS exports represent another way that U.S. corn production enters global markets. This chart is from the ERS data products, U.S. Bioenergy Statistics and the Feed Grains Database.

The price of sorghum has returned to below the price of corn

Thursday, September 1, 2016

Sorghum is a common feed grain that can substitute for corn in livestock feed rations and in the production of ethanol. Corn tends to be preferred over sorghum as a feed ingredient, so sorghum typically sells at a discount compared to corn in global markets.? Throughout much of the 2014 marketing year (September-August) this situation reversed, and due in large part to strong demand from China, sorghum began selling at a premium over corn, at times exceeding 20 percent. As a result, sorghum use for ethanol production declined while acreage for the 2015 harvest increased to result in a record-large U.S. crop. This, combined with recent changes in China?s import policy that could reduce U.S. sorghum?s export prospects for the 2015 crop, has greatly increased the availability of sorghum in domestic markets for feeding and ethanol production. Because of the greater availability of sorghum, the price fell back below the price of corn and is now more in line with historic relationships. Given these lower prices, sorghum use for ethanol production is expected to expand more than fivefold this year, and U.S. shipments to Mexico, which were hampered by the high prices for the 2014 crop, are expected to at least partially resume during the current marketing year, which began in September 2015. This chart is based on the October 2015?Feed Outlook?and the ERS?Feed Grains?database. ?

U.S. corn production and use expected to reach a new record in 2016

Thursday, September 1, 2016

U.S. corn area in 2016/17 is estimated at 94.1 million acres, of which 86.6 million is expected to be harvested for grain, up 5.9 million from last year. With a national average yield forecast of 168 bushels, corn production this year would reach 14.5 billion bushels, 939 million bushels above last year?s harvest and 324 million more than was harvested from the record-large 2014/15 crop. The larger supply is expected to have a dampening effect on prices, making U.S. corn more competitive in the global market and boosting exports to 2.1 billion bushels in 2016/17, up from 1.9 million from the 2015/16 crop and the highest since 2007/08 when they reached 2.4 billion. Use for ethanol as well as other food, seed and industrial uses is expected to increase only modestly (less than 1 percent) to 6.7 million bushels, reflecting the maturity of those markets. Feed and residual use (a category that mainly includes livestock feed as well as other uses unaccounted for) is expected to consume 5.5 billion bushels, up 300 million from the 2015/16 crop. With projected supply expected to exceed total use of the 2016/17 crop, ending stocks are forecast to grow to 2.1 billion bushels, up from the 1.7 billion bushels expected to be on hand at the end of the 2015/16 crop year. This chart is from the ERS report Feed Outlook, July 2016.

Sugarcane production in Brazil has expanded, and about half is used for ethanol

Thursday, September 1, 2016

The Government of Brazil has supported the production of ethanol as an automotive fuel for many years, beginning in 1975 with the Pro?lcool program, to encourage production of ethanol from sugarcane and including many programs that remain in effect today?including mandatory ethanol-blending requirements in gasoline and tax exemptions for ethanol-powered cars. Sugarcane is nearly the exclusive ethanol feedstock in Brazil, and Brazil is the world?s largest sugarcane producer, accounting for 39 percent of world production. Until the mid-1990s, the share of sugar production turned into ethanol was set by government policy, but since then market forces have determined the share that is converted to ethanol. In particular, the relationship among the prices of sugar, gasoline, and ethanol, as well as storage capacity at sugar mills, all play a role. Production of both sugar and ethanol in Brazil has expanded rapidly since the mid-1990s. Sugarcane production reached 640 million tons in 2014, up 188 percent since 1991, while over the same time, the share used for ethanol production declined from 72 percent in 1991 to a low of just over 49 percent in 2003 and a 2014 level of 55 percent. This chart is from the ERS report, Brazil?s Agricultural Land Use and Trade: Effects of Changes in Oil Prices and Ethanol Demand, released June 29, 2016.

Farms involved in rural development related activities vary by type of activity

Thursday, September 1, 2016

While rural development efforts generally focus on the nonfarm economy in the United States, over the last 10 years, several USDA Rural Development programs have put increased emphasis on funding farm-related business activities associated with renewable energy, local/regional food industries, and the use of farm and ranch natural resources. Using data from the 2007 Agricultural Resource Management Survey, the characteristics of farms involved in organic farming, value-added agriculture, direct marketing, agritourism, and energy/electricity production are compared in this chart. Household wealth and income are important indicators of financial capacity, or the ability to make financial investments in farm activities. Average farm household net worth was highest for agritourism farms ($2.0 million) and lowest for direct marketing farms ($631,000). Total household income exhibited a different pattern and was highest for energy/electricity farms ($165,000 annually) and value-added farms ($90,000 annually), on average. The income generated by these rural development-related activities is considered part of farm income (which was highest, on average, for energy/electricity and organic farms, and negative for agritourism farms).?This chart comes from the ERS report, Farm Activities Associated With Rural Development Initiatives, ERR-134, May 2012.

Rural counties drive the 2000-11 growth in U.S. onshore production of oil and natural gas

Thursday, September 1, 2016

From 2000 to 2011, onshore gross withdrawals of natural gas in the lower 48 States increased by about 47 percent, reaching historic highs in every year after 2006. Over the same period, withdrawals of oil increased by 11 percent, with much of that growth occurring between 2007 and 2011. Rural counties (nonmetro noncore) accounted for almost all of the growth in oil production and a large share of the growth in gas production based on newly released data from ERS on County-level Oil and Gas Production in the U.S.? While just over 35 percent of counties in the lower 48 States reported some level of oil or natural gas production during 2000-11, sizeable changes in production levels were more concentrated. Interestingly, the number of counties with an increase in oil and gas production of $20 million or more over the decade (218 counties) was nearly the same as the number (212) with a decrease of $20 million or more. This map is found in the Documentation and Maps page of the data product County-level Oil and Gas Production in the U.S., and also in the Amber Waves article, "Onshore Oil and Gas Development in the Lower 48 States: Introducing a County-Level Database of Production for 2000-2011."

The United States has been a net exporter of ethanol since 2010

Thursday, September 1, 2016

Between 2001 and 2014, global biofuel production and use grew rapidly, driven by a combination of rising gasoline prices, falling prices of biofuel inputs, and policies mandating use of renewable fuels. These same factors also led to an expansion of global trade in biofuels. The United States is the world?s largest producer and consumer of ethanol, and prior to 2010 relied partly on imports to meet domestic demand. But beginning in 2010, the United States emerged as a net exporter of ethanol, reflecting the ?blend wall? that limits the ethanol content of gasoline used in most conventional vehicles to 10-percent ethanol, while demand for biofuels from other countries, particularly the EU and Brazil, continued to grow. The United States has remained a net exporter of ethanol each year since 2010, and since 2011 has been the world?s largest exporter of ethanol. In 2014, oil prices declined by more than half, pressuring U.S. ethanol consumption; however, the market remained strong due to U.S. government policies mandating ethanol use, the use of ethanol as an octane enhancer, and a large export market. This chart is from Biofuel Use in International Markets: The Importance of Trade, EIB-144, September 2015.

Corn production in Brazil is expanding

Thursday, September 1, 2016

Since 2000/01, corn production in Brazil has doubled, reaching a record 85 million metric tons in 2014/15, equivalent to 8.4 percent of global corn production. Corn is now Brazil?s second largest crop (after soybeans), accounting for 20 percent of planted area, and Brazil is the world?s second largest corn exporter, behind the United States. Due to a favorable climate and long growing season, double-cropping is possible in much of the country, and the majority of corn in Brazil is harvested as a second crop planted after soybeans. Technological advances in soil management and improvements in hybrid corn varieties have supported this expansion. The second-crop corn harvest largely serves the export market, putting it in direct competition with the timing of the U.S. corn harvest. This chart is from the ERS report, Brazil?s Corn Industry and the Effect on the Seasonal Pattern of U.S. Corn Exports, released on June 15, 2016.

High Renewable Identification Number (RIN) prices signal constraints to U.S. ethanol expansion

Thursday, September 1, 2016

Renewable Identification Numbers (RINs) are codes assigned to batches of renewable fuel used to administer the federal Renewable Fuel Standard (RFS), which specifies minimum annual levels of U.S. biofuel consumption. Obligated parties under the RFS use RINs to report qualifying biofuel use to the U.S. Environmental Protection Agency to demonstrate compliance with their annual RFS requirements. After many years of relatively low prices for conventional ethanol RINs, those prices have recently risen sharply because RFS ethanol mandates now exceed ethanol use. This result reflects declining gasoline use and technical constraints on blending more than 10 percent ethanol in U.S. gasoline?the so-called E10 blend wall. The gap between ethanol mandates and ethanol use, together with the anticipated depletion of excess RINs from prior years, are driving up RIN prices. Additional factors that may be affecting RIN prices include uncertainties regarding potential regulatory and legislative actions. This chart appears in ?High RIN Prices Signal Constraints to U.S. Ethanol Expansion,? in Feed Outlook: April 2013 (pages 18-22).

The cost of producing corn and soybeans varies across the three leading exporters

Thursday, September 1, 2016

The cost of producing agricultural commodities varies across countries and regions due to many factors, including the quality of resources, climatic conditions, and the cost and availability of necessary inputs. Differences in cost of production help to determine a country?s export competitiveness in global markets, with low-cost producers usually capturing a larger share of global exports. Corn and soybeans are among the most important agricultural commodities traded in global markets, and the United States, Brazil and Argentina are the leading exporters, accounting for a combined 88 percent of world soybean exports and 73 percent of world corn exports between 2008 and 2012. Based on data for 2010 and 5-year average yields, the cost of producing soybeans in Argentina average $8.81 per bushel, compared to $7.47 in Brazil and just over $8.00 in the United States. For corn, Brazil had the highest cost of production at $4.74 per bushel, compared to $3.93 for Argentina and $3.80 in the United States. This chart is from the ERS report, Corn and Soybean Production Costs and Export Competitiveness in Argentina, Brazil and the United States, released on June 22, 2016.

E10 blend wall forecast to constrain compliance with conventional Renewable Fuel Standard (RFS)

Thursday, September 1, 2016

Declining use of gasoline in the United States, combined with market constraints to growth in the blending of biofuel, have resulted in U.S. ethanol use falling short of the Federal Renewable Fuel Standard (RFS), energy legislation that mandates minimum annual levels of biofuel consumption in the United States. Annual U.S. gasoline use has declined from its 142-billion-gallon peak in 2007 to about 133 billion gallons now, reducing the size of the existing U.S. market for ethanol. Nearly all retail gasoline sold in the United States is a 10-percent ethanol blend (E10). The limited ability to expand use of higher ethanol blends creates an effective constraint on total ethanol use at near 10 percent of total gasoline consumption?the E10 blend wall. As a result, ethanol use is falling short of the portion of the RFS mandate that can be met with corn-based ethanol. This gap is expected to widen in the future as gasoline consumption declines further and the RFS mandates higher levels of biofuel consumption. This chart appears in High RIN Prices Signal Constraints to U.S. Ethanol Expansion PDF icon (16x16), Feed Outlook special article, April 2013.

Nearly all U.S. ethanol is produced and sold in domestic markets

Thursday, September 1, 2016

U.S. production of ethanol hit a record 14.8 billion gallons in 2015, and when combined with the carry-over stocks from the previous year and 2015 imports, the total ethanol supply reached an all-time high of 15.7 billion gallons. Nearly all ethanol blended into the U.S. gasoline supply is produced domestically, and, over the past five years, about 94 percent of domestic production was used in the United States. Ethanol imports peaked in 2006 at 731 million gallons (equal to 12 percent of the U.S. supply), but each year since 2010 exports have exceeded imports, making the United States a net exporter of ethanol. The domestic market for ethanol is at full capacity due to the technical and regulatory constraints that limit most of the U.S. gasoline supply to a 10 percent maximum ethanol blend, so the export market is now the primary opportunity for growth. Ethanol exports peaked in 2011 at nearly 1.2 billion gallons, but have remained below 850 million gallons for the past four years. This chart is based on the ERS U.S. Bioenergy Statistics data product.

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