|
 “Domestic ethanol consumption in 2017 will be influenced by
domestic gasoline consumption, due to the ethanol blending
requirement and the biofuels volume requirement associated with
the Renewable Fuels Standard,” Hubbs says. “The EPA final
rulemaking for the Renewable Fuels Standard for 2017 was
released on Nov. 23 and is discussed in greater detail in the
farmdoc daily article posted Nov. 30. In brief, the renewable
fuels volume requirement is set at 19.28 billion gallons for
2017, which is up from the 18.11 billion gallons required in
2016.
“The conventional ethanol requirement is set at 15 billion
gallons for 2017, 500 million gallons larger than 2016 and equal
to the statutory requirement level,” Hubbs says. “If the
gasoline consumption forecast used by the EPA is correct, the
E10 blend wall will be 14.36 billion gallons in 2017. The EPA
believes an ethanol supply of 14.56 billion gallons is
reasonably attainable in 2017. Within the 14.56 billion gallons,
E15 and E85 blends are expected to be 107 and 204 million
gallons respectively. The ability to attain the E15 and E85
blend levels remains to be seen, but the increase in ethanol
requirements provides support for greater corn usage in 2017.”
U.S. retail gasoline prices averaged $2.14 per gallon in 2016,
which is 12 percent less than the price experienced in 2015 and
is the lowest price since 2004. The December Energy Information
Agency Short Term Energy Outlook projected an increase in
gasoline prices for 2017 to $2.30 per gallon. Despite the
projection of higher gasoline prices, gasoline consumption is
forecast at 143.60 billion gallons in 2017, which is up from the
142.72 billion gallons consumed in 2016. Ethanol production is
forecast to be 1 million barrels per day.
“If the EIA projection is correct, approximately 15.3 billion
gallons of ethanol will be produced in 2017,” Hubbs says. “When
considering the robust ethanol export trade currently in
process, the U.S. ethanol industry is expected to produce a
record level of ethanol in 2017.”
Ethanol export numbers are available from U.S. Census trade data
for 2016 through November. U.S. exports of ethanol thus far are
at 948 million gallons, which is up almost 27 percent from the
similar period in 2015.
According to Hubbs, for 2016, the prospect of ethanol exports
exceeding 1 billion gallons is not unreasonable.
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Canada, China, and Brazil imported approximately 67 percent of
the ethanol shipped from the U.S. through November. “The
increase in ethanol exports is driven largely by increased
volumes sent to China and Brazil,” Hubbs says. “China imported
179 million gallons through November, which far exceeds the 73.8
million gallons imported during the entirety of 2015. Brazil
imported 224 million gallons through November, which is almost
double from 2015. As we progress into 2017, the increases are
expected to persist in Brazil because high sugar prices are
expected to decrease ethanol production as mills allocate cane
for sugar production in 2017. There is concern that China could
raise ethanol tariffs and reduce ethanol imports in 2017 due to
a possible trade dispute with the new administration.”
Hubbs says the implications for corn consumption during the 2016-17
marketing year can be seen in the USDA Grain Crushing and Co-Product
Production report released on Jan. 3. Grain crushing for fuel
alcohol is available through November. For the first three months of
the marketing year, 1.34 billion bushels of corn has been processed
for ethanol. This is up 3.2 percent from 2015 processing numbers.
“If corn used for ethanol production maintains this pace, 5.37
billion bushels will be processed in the marketing year,” Hubbs
says. “Using EIA weekly ethanol production numbers, December ethanol
production averaged over 1 million barrels per day. These production
levels place corn use for ethanol production in a range of 455 to
460 million bushels for the month if corn use maintains the pace of
the three previous months. With a conservative estimate of corn
crush in December, total corn consumption for ethanol production
through the first third of the marketing year would be above the
current WASDE projection.
“Lower corn prices, strong ethanol exports, and greater blending
requirements combine to make 2017 appear to be a strong year for
corn consumption in ethanol production,” Hubbs concludes. “If the
U.S. ethanol industry produced over 1 million barrels per day for
the entire year, the ability to blend at requirement levels under an
expanded gasoline consumption scenario and meet potential export
market demand bodes well for corn use in the sector for 2017.”
[Debra Levey Larson
News & Public Affairs
University of Illinois
College of Agricultural, Consumer and Environmental Sciences] |
