Biofuels: Ethanol’s Growth Is Spelled I-N-D-I-A

by Jim Lane (Biofuels Digest) When USDA forecasts of corn ethanol exports to China dropped below 80 million gallons from 225 million last year — and Green Plains CEO Todd Becker issued a “zero exports expected” addendum to his 2017 outlook for the ethanol giant — informed sources began describing 2017 as a ethanol year in search of a market for the potential to grow.

Where does extra ethanol go when it’s not needed? Here’s the general answer: If it can’t go into the E85 market, try the E15 market, otherwise try Canada, China, Brazil and India.

Until that pricing mismatch is resolved, E85 is not going to provide the excess “swing demand” to meet the booming production of US ethanol.

The bad news is that Canada will adopt a 2030-focused national clean fuels standard of the LCFS type — a standard that hugely favors cellulosic feedstocks, renewable diesel and biodiesel. Ethanol is terrific (especially the cellulosic kind), but ramping up near-term ethanol import demand isn’t a likely outcome of the Canadian shift.

Put simply, here’s the China problem: the country has a huge corn inventory of 8.4 billion bushels, according to analysis from CCM, and CCM notes that “The main problem of this corn is, that it is partly very old, harvested in 2012 and 2013 and additionally indicates low quality. This corn cannot be used for animal feed, nor corn starch production…the government is seeking for effective ways to get rid of the remaining inventory.” That supply is enough corn to make 8.4 billion gallons of corn ethanol, enough to supply China for years at its current demand.

CCM thinks that supply will be released for corn ethanol production in China and notes that “China’s textile and clothing manufacturer Shiqi Group is going to create a gigantic plant for a yearly production of 300,000 tonnes of fuel ethanol in June 2017.”

Brazil’s been importing because sugar producers are taking advantage of good sugar prices to export more sugar and produce less ethanol.

But sugar prices have come down from a September 2016 high of 23.3 cents and are hovering at the 22 cent mark now, and Agrimoney said that it expects “a raw sugar price of 19 cents a pound in the last three months of 2017.”

And the E5 domestic production outlook in India doesn’t look superb right now. As we reported earlier this year, “ drought impacts in major sugarcane areas such as Maharashtra will reduce ethanol production this year due to a lack of molasses for feedstock, making it unlikely that the country will achieve its blending mandate yet again.”

But Indian sugar producers want ethanol market supports back in place before they shift more production to ethanol. As we reported in January “sugar mills are demand the government reinstate the excise duty waiver for ethanol as well as a return to the ethanol prices set last year as part of a wider support package to help bail out the industry. The national sugar millers association says resetting the ethanol policies would help encourage mills to produce more ethanol with better returns, thereby boosting profitability and strengthening bottom lines allowing mills to pay farmers the higher cane prices they demand.”

But ambition in India for renewables so far outstrips — by a country mile — the production reality.

But the build-up in capacity will take time. Meanwhile, there’s the fuel ethanol demand and also ethanol demand in the chemical industry to be supplied to.

One special trend to note — India has long been a diesel-dominated market, with transport more focused on shipping than personal cars. But gasoline demand is surging. Last year, according to the Indian Oil Ministry, gasoline demand rose 14.5 percent to 21.8 million tonnes, compared to a 7.8 percent jump for diesel. That’s despite a higher tax rate for gasoline than diesel.

Overall, the International Energy Agency projects that as much as 25 percent of global energy demand growth through 2040 will come via India. When you look at the ethanol market, that’s not surprising at all. READ MORE