Trump Might Start an Ethanol Trade War With Brazil
by Mario Parker and Fabiana Batista (Bloomberg) Brazil weighing tariffs on imports made from U.S. grain; Hedge funds cut corn holdings, get less bearish on sugar — President Donald Trump’s America First rhetoric is doing no favors for U.S. ethanol producers, who are hoping to avoid a trade fight with fuel buyers in Brazil.
The administration has started making noise about rising imports of Brazilian biofuel made from sugar. That’s got the South American producer mulling tariffs or a quota on imports of U.S. fuel made from corn. A trade spat would be a much bigger problem up north because the U.S. ships more than four times as much to Brazil than it buys from the country.
Raw-sugar futures have risen as much as 8 percent since the end of June, buoyed by the outlook for increased use in ethanol. Gains for crude oil have spurred Brazil’s state-controlled oil company, Petroleo Brasileiro SA, to raise gasoline prices, boosting the allure of ethanol, which competes directly at the pump in a country where most cars can use either fuel. A recent fuel-tax hike is also favoring use of the biofuel.
While Brazil also depends on its shipments to the U.S., its No. 1 customer, its industry as a whole is not as reliant on exports because of a robust domestic market, making a trade dispute more of an issue for the American producers. The U.S.’s capacity exceeds its current domestic demand.
To ward off a similar fate from Brazil, Washington-based trade groups for agriculture and biofuels are lobbying the Trump administration for a softer stance and for the South American nation to reconsider its move toward a tariff.
The efforts seem to be helping. The South American nation on July 25 postponed an official decision from its trade chamber on the potential 20 percent tax. Groups including the U.S. Grains Council, the Renewable Fuels Association and Growth Energy applauded the move. READ MORE
Our View: Ethanol No need for a fuel trade war–Why It Matters: Brazil and the United States are moving toward a trade war over ethanol, and Midwestern corn producers figure to lose. (Mankato Free Press)
Editorial: Ethanol — There’s no need for a fuel trade war (Albert Lea Tribune)