After transitioning from a net importer of ethanol to a net exporter during 2010, the United States exported record levels of ethanol through the end of 2011 and looks to be on track to continue exporting significant volumes during 2012 (Figure 1). While U.S. ethanol production capacity remains largely unchanged from 2011, a number of other factors, both domestic and foreign, will influence the U.S. ethanol trade balance moving forward. Sluggish gasoline demand, combined with ethanol blending limits, is currently restraining domestic consumption levels. At the same time, increased Renewable Fuel Standard (RFS) mandates call for higher volumes in the fuel supply. In addition, sugarcane ethanol exported from Brazil looks to rebound from a low year in 2011 and compete with U.S. corn ethanol in the world market. These conflicting factors create some uncertainty and will make it harder for U.S. ethanol exports to reach 2011 levels, but ultimately U.S. export volumes should still be significant and should remain the world leader in 2012.
During 2011, the United States exported a total of approximately 1.2 billion gallons of ethanol, compared to almost 400 million gallons in 2010. Brazil was the largest recipient of U.S. ethanol in 2011, importing 400 million gallons compared to approximately 20 million gallons in 2010; significant volumes of ethanol were also sent to Canada, Europe, and the United Arab Emirates. Through April 2012, U.S. ethanol exports have fallen from second half 2011 levels, but are still significant at over 300 million gallons, while imports remain low at less than 30 million gallons with the majority coming from Brazil.
The largest factor driving the ramp up in U.S. ethanol exports has been the combination of increased ethanol production capacity in the United States with constraints limiting the ability of the United States to blend ethanol beyond 10 percent by volume of gasoline (E10), also known as the ethanol blend wall. In the absence of higher levels of ethanol blending, such as E15 or E85, ethanol production has increased beyond the capacity to blend additional volumes into the domestic gasoline pool. Thus, export markets create an outlet for the majority of these marginal ethanol volumes. Working in the opposite direction, one factor that might be slowing ethanol production compared to last year has been the expiration of the Volumetric Ethanol Excise Tax Credit (VEETC) of $0.45 per gallon, also known as the blender's tax credit. This has reduced profit margins for domestic ethanol producers and potentially impacted export volumes in the early part of 2012.