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US, Brazil Ethanol Swap Seen in 2012

09 January 2012

US - The ethanol subsidy may be history, but government policies can still produce crazy economics in the biofuel business.

Brazil and the United States, the world’s two largest producers of the gasoline additive, are expected to swap some of their supplies this year, according to the Des Moines Register.

Last year, Midwest ethanol producers shipped an estimated 250 million gallons of their product to Brazil, which ran short of the biofuel for its domestic market. Production in Brazil has fallen amid high sugar prices and a succession of poor harvests.

But Brazil still shipped a small amount of ethanol to the United States in 2011, and exports are expected to increase this year because of US regulations that rate the Brazilian biofuel that’s distilled from sugar cane as better for the environment than the US version made from corn.

“We would rather that our ethanol be burned here in this country. We feel it’s a domestic fuel,” said Jim Seurer, chief executive officer of Glacial Lakes Energy LLC, which started shipping ethanol to Brazil last spring from its Mina, S.D., plant. Until then, much of the distillery’s output had been shipped to California, but Brazilians were willing to pay a higher price, Seurer said. “We’ll continue to ship there if it’s profitable.”

It’s unclear how much ethanol the United States will import from Brazil this year. The Energy Department has estimated that it could be as much as 300 million gallons, while some in the US industry think the amount could be less. But the fact that the countries would be swapping ethanol at all strikes many as bizarre.

A boom in ethanol exports to Brazil and elsewhere is a key reason the US biofuel industry has largely shrugged off the end of the 45-cent-per-gallon ethanol subsidy and the 54-cent tariff on imported ethanol. Both the subsidy and the tariff expired Dec. 31.

Final numbers on 2011 exports aren’t in yet. But they’re expected to total about 1 billion gallons, including the shipments to Brazil. Exports totaled about 400 million gallons in 2010.

US production of corn ethanol is believed to have reached a record 14.5 billion gallons in 2011.

In 2012, the US renewable fuel standard will require refiners to use 2 billion gallons of what are known as advanced biofuels, a category that excludes corn ethanol. Advanced biofuels are required to produce at least 50 per cent lower greenhouse gas emissions than gasoline, and corn ethanol doesn’t qualify. Ethanol made from corn has a carbon footprint closer to gasoline because of energy needed to grow the grain.

Biodiesel, which is made from vegetable oil, animal fats and restaurant grease, will fill most of that advanced biofuel requirement. However, Brazil’s sugar cane ethanol counts as an advanced biofuel and could account for several hundred millions of gallons of the mandate, according to the Environmental Protection Agency.

The advanced biofuel mandate is scheduled to continue growing after 2012, reaching 21 billion gallons by 2022.

TheCropSite News Desk

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