The US ethanol market is expected to sustain growth in 2025, coming off a year of record output and exports as the industry seeks support from the incoming Trump administration. According to the US Energy Information Administration, ethanol production averaged 1.051 million b/d through the week ended on Dec. 13, up 2.57% compared to 2023; while weekly output reached a record-high of 1.119 million b/d during the week ended on Nov. 22.
In the first quarter of 2024, outright spot ethanol prices reached three-year lows across the physical markets, according to Platts, part of S&P Global Commodity Insights, assessments. Softer spot prices have continued for most of the year, as the Platts Chicago ethanol benchmark has averaged 24.18% lower in 2024 compared to the previous year through Dec. 20.
Despite lower outright prices, ethanol producers maintained favorable margins for the majority of 2024 for back-to-back calendar years. According to Platts, ethanol cash margins averaged 24.30 cents/gal through Dec. 20, compared to 40.88 cents/gal in 2023.
Higher ethanol prices are forecast in 2025; however, driven by an increase in demand along with strengthening corn prices, according to S&P Global Commodity Insights analysts. According to Commodity Insights, the Chicago ethanol benchmark is forecasted to average 211 cents/gal in 2025, up from an average of 169 cents/gal in 2024. Additionally, the D4 and D6 Renewable Identification Numbers complex is expected to rise in the coming year with the expected transition from the Blender’s Tax Credit to the Clean Fuel Production Credit, while concerns have risen regarding supply tightness for waste feedstocks including used cooking oil and tallow due to possible import restrictions and tariffs.
E15 uncertainty
In previous years, emergency waivers have been granted to allow E15 sales during the summer months, but the ethanol industry continues to seek a permanent solution. “It would be beneficial to have [a permanent rule] in place and not rely on emergency waivers,” a producer said. “This would allow for a more strategic approach.”
A provision to allow the year-round sale of E15 was stripped from a congressional funding bill that included close to $31 billion in aid for farmers, on Dec. 21. In an earlier proposed bill, nationwide year-round E15 was included, but the provision has since been removed.
As it currently stands, year-round E15 will only be available in eight Midwestern states as per the US Environmental Protection Agency’s final rule in February that granted these states permission to lift the previously in-place summertime ban starting in April 2025.
In October, California Governor Gavin Newsome directed the state’s Air Resources Board, or CARB, to expedite the approval of E15. Currently, California is the only US state without access to E15 in entirety.
Fundamental forecasts
According to Commodity Insights’ short-term outlook, refiner and blender net ethanol inputs are projected to grow to 933,000 b/d in 2025. Through the week ended on Dec. 13, net ethanol inputs have averaged 895,560 b/d in 2024 according to the EIA. Meanwhile, Commodity Insights forecasts US Midwest corn to average $4.18/bushel in 2025, up from the $4.10/bu season-average corn price received by producers in 2024, according to the US Department of Agriculture.
In its latest World Agriculture Supply and Demand Estimate report released on Dec. 10, the USDA lowered the marketing year 2024-25 corn ending stocks to 1.938 billion bushels, a decrease of 61 million bushels, or 3.05%, from previous estimates. Meanwhile, corn production for MY 2024-25 was revised to 15.143 billion bushels, down 60 million bushels from previous estimates.
Market awaits 45Z guidance
Industry participants continue to await guidance on the CFPC under section 45Z of the Inflation Reduction Act, particularly on whether a modified GREET or CORSIA model will be used to calculate life-cycle greenhouse gas emissions to determine credit qualification.
Treasury spokesperson Michael Martinez said in a statement on Dec. 3, “The Treasury anticipates issuing guidance before the end of the [Biden] administration that will enable eligible producers to claim the 45Z credit for 2025.”
Looking ahead, the ethanol industry’s continued growth into the 2030s will likely hinge on the adoption of ethanol-to-jet sustainable aviation fuel. To meet this goal, ethanol producers will have to lower the carbon intensity of their products to meet greenhouse gas reduction requirements of at least 50%, which will only be viable via significant investments into carbon sequestration and climate smart agriculture practices.
Looking back at a record-year for ethanol exports
As production levels reached new heights in the US in 2024, a surge in exports helped ease the domestic balance sheet as global ethanol trade dynamics along with cheap US ethanol has favored US product as an import option over competitors, mainly Brazil.
Through September, US ethanol exports have totaled 33.142 million barrels, up 33.35% compared to the same period in 2023, according to the latest monthly EIA data released on Nov. 29. Additionally, ethanol exports through the first nine months of the year surpassed the previous record by 11.04%, set in 2018 when exports were reported at 29.848 million barrels through September.
For 2025, Commodity Insights forecasts show that US ethanol exports are projected to decrease to an average of 95,000 b/d, down from an average of 119,500 b/d through Dec. 13 according to the EIA. A trader source said that particularly strong exports provided significant margin support throughout 2024, drawing from domestic inventories and keeping supply and demand dynamics mostly balanced amid record levels of production.
Brazil, the second largest exporter of ethanol, has seen a shift in drivers’ preference for hydrous E100 at retail pumps since late 2023, which has led to a spike in domestic ethanol demand and a decrease in product leaving the country, opening the door for increased US ethanol exports to fill overseas demand. The US has seen large volumetric increases in ethanol outflows to major destinations including the UK, India, and Colombia.
According to UNICA, the Brazilian Sugarcane Industry Association, Brazilian ethanol exports have totaled 1.785 million cu m, or 11.234 million barrels, through November, down 19.42% compared to the same period in 2023. Meanwhile, through October domestic retail ethanol sales have increased 41% compared to the same period in 2023, according to Brazil’s National Petroleum Agency.
Source: Reuters