U.S. Ethanol Exports to Brazil Already Falling

Cindy Zimmerman 1 Comment

Despite no official announcement, technically once the August 31 deadline passed, all U.S. ethanol shipped to Brazil became subject to a 20 percent tariff. However, U.S. exports to Brazil have already been declining this year, according to the Renewable Fuels Association (RFA).

The latest government data shows U.S. ethanol exports down to 74 million gallons in July, a decrease of 38 percent compared to the same month last year and the lowest total for July in six years. The escalation of trade barriers and the impacts of COVID-19 have caused year-to-date ethanol exports to drop nine percent compared to the same period last year and 22 percent compared to the same period in 2018.

In addition to Brazil, RFA notes that virtually no U.S. ethanol was shipped to China or Colombia in July due to the existence of unjustified trade barriers in those countries. Combined export volumes to all three countries hit a peak of 129 million gallons in March 2018, but dropped to a trickle of just 34,000 gallons in July 2020. Prior to August 31, the Brazilian tariff rate quota had allowed 198 million gallons of U.S. ethanol imports before the 20% tariff kicked in.

“As the July export numbers show, the spread of protectionist trade barriers around the globe is having a very real impact on demand for U.S. ethanol,” said RFA President and CEO Geoff Cooper. “These tariff and non-tariff barriers must be addressed and countered with measures that ensure a fair and level playing field for ethanol trade. The persistent ethanol trade disputes involving key markets like Brazil, China, and Colombia are taking a serious toll on U.S. ethanol producers who are already contending with the economic fallout from COVID-19. More needs to be done to restore open and healthy ethanol trading relationships with our customers around the globe.”

House Agriculture Committee Chairman Collin Peterson says Brazil’s move is just more bad news for producers already struggling because of the coronavirus and the “Environmental Protection Agency’s reckless implementation” of the Renewable Fuel Standard. “The Trump Administration should continue working with Brazilian officials to restore the duty-free access that was in place from 2012 to 2017,” Peterson said in a statement. “Tariff wars have consequences, and our biofuels producers are seeing that first hand.”

Meanwhile, Iowa Renewable Fuels Association Executive Director Monte Shaw points out that Brazilian ethanol imports continue to enjoy tariff free status coming into the U.S. “President Trump stated his Administration would pursue an equalization of tariffs if Brazil took this step. We look forward to quick action on this front as Brazil continues to flood the California market with duty-free ethanol while at the same time penalizing U.S. producers,” said Shaw.

U.S. ethanol production continues to run below year ago levels. For the week of August 28, production remained nine percent below the same week in 2019 as a result of the continuing effects of the COVID-19 pandemic. The four-week average ethanol production rate declined 0.2% to 924,000 b/d, equivalent to an annualized rate of 14.16 billion gallons. At the same time, ethanol stocks grew 2.3% to 20.9 million barrels, which was 12.3% below year-ago volumes.

Brazil, Ethanol, Ethanol News, RFA, Trade

Comments 1

  1. Unfortunately, American ethanol is now too expensive for the Brazilian consumer, since the Brazilian currency lost value with the World rise in the dollar.

    Even if the Brazilian government reduces all US ethanol tariffs, it will remain more expensive than the domestic price of ethanol.

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