1

2018 Report on Ethanol Market Concentration

I. Introduction

This Report presents the Federal Trade Commission’s (“Commission” or “FTC”) 

concentration analysis of the ethanol production industry for 2018.

1

 Section 1501(a)(2) of the 

Energy Policy Act of 2005 requires that the FTC annually “perform a market concentration 

analysis of the ethanol production industry . . . to determine whether there is sufficient 

competition among industry participants to avoid price-setting and other anticompetitive 

behavior.”2

 Pursuant to the statute, the FTC must measure concentration using the HerfindahlHirschman Index (“HHI”) and consider all marketing arrangements among industry participants

in preparing its analysis.

3

 The FTC’s report is due to Congress and the Administrator of the 

Environmental Protection Agency (“EPA”) by December 1 of each year.

4

As in previous reports, FTC staff (“staff”) analyzed concentration based on U.S. ethanol 

production capacity and actual ethanol production. Staff’s analysis does not address whether the 

concentration occurs in a relevant antitrust market (which would include both geographic and 

product aspects); instead, it addresses market capacity and production concentration. For each 

analysis, staff calculated HHIs two different ways, first by allocating market shares among 

producers and then by allocating market shares among marketers.5

 Under both approaches, 

concentration based on producer shares is lower than concentration based on marketer shares. 

 1 This Report builds upon Commission reports from previous years. Prior reports contain background information 

absent from this Report. See FTC, Oil and Gas Industry Initiatives, Competition Policy: Reports, 

https://www.ftc.gov/tips-advice/competition-guidance/industry-guidance/oil-and-gas. 2 Energy Policy Act of 2005, Pub. L. No. 109-58, § 1501, 119 Stat. 1069, 1074, amended by Energy Independence 

and Security Act of 2007, Pub. L. No. 110-140, 121 Stat. 1492. For purposes of this Report, we presume that 

Congress used the term “price-setting” to mean “illegal price fixing.” 3 Id. 4 Id. 5 Producers are companies or persons that manufacture ethanol; marketers are producers or third-party companies or 

persons that market, sell, and transport ethanol.
2

Based on capacity, the HHIs are 480 for producer-based shares and 731 for marketer-based 

shares. Based on actual production, the HHIs are 459 for producer-based shares and 759 for 

marketer-based shares. There has been only a slight change in concentration since last year. 

The low level of concentration and large number of market participants in the U.S. 

ethanol production industry continue to suggest that the exercise of market power to set prices, or 

coordinate on price or output levels, is unlikely. As has been the case each year since the 

Commission began reporting, the current HHIs indicate that the industry is unconcentrated.6 At 

this level of concentration, a single ethanol producer or marketer likely lacks market power. 

Successful anticompetitive coordination would require agreement among a very large number of 

competitors and thus is similarly unlikely. Moreover, imports and the possibility of entry would 

likely impede the exercise of market power by any group of domestic firms.7

II. Industry Updates

A. Renewable Fuel Standard

Since 2005, Congress has required that the national transportation fuel supply contain 

a minimum annual volume of renewable fuels, including fuel ethanol.8 This mandate, known 

as the Renewable Fuel Standard (“RFS”), increases every year. In 2007, Congress revised the 

RFS, significantly increasing the minimum volumes of ethanol and adding requirements for 

advanced biofuels.

9

 For 2018, the RFS mandates 26.0 billion gallons of renewable fuel, 15.0

 6 The Commission and U.S. Department of Justice characterize markets in which the HHI is below 1500 as 

unconcentrated. U.S. Department of Justice and Federal Trade Commission Horizontal Merger Guidelines (2010) 

(“Horizontal Merger Guidelines”) § 5.3, https://www.ftc.gov/sites/default/ files/attachments/mergerreview/100819hmg.pdf. 7 On October 9, 2018, President Trump directed the Environmental Protection Agency to begin a rulemaking 

process that would allow year-round sales of E15 fuel (gasoline with 15 percent ethanol content). See StarTribune, 

Trump orders start of process to allow E-15 fuel sales year-round (Oct. 8, 2018), http://www.startribune.com/trumporders-start-of-process-to-allow-e-15-fuel-sales-year-round/496010161/. Because no rulemaking process has begun,

this report does not assess the potential impact of year-round sales of E15 fuel. 8 See Energy Policy Act of 2005 § 1501, supra note 2. 9 “Advanced biofuel” refers to a renewable fuel, other than ethanol derived from corn starch, that has lifecycle 

greenhouse gas emissions that are at least 50 percent less than the average greenhouse gas emissions of the baseline 
3

billion gallons of which can be conventional corn ethanol.10 The 2018 advanced biofuels 

target is 11.0 billion gallons, at least 7.0 billion gallons of which must be cellulosic biofuel.11 

The annual use of renewable fuels did not keep pace with the statutory RFS 

requirements, prompting the EPA to decrease the requirements.12 The EPA published these 

revised requirements in 2016,13 reducing the 2016 requirement from 22.3 billion gallons to 

18.1 billion gallons, of which 14.5 billion gallons of conventional corn ethanol could count 

toward the 2016 RFS.14 For 2018, the EPA required 19.3 billion gallons of total renewable 

fuels, 15.0 billion gallons of which can be conventional corn ethanol.15 

While market participants believe the U.S. ethanol industry will meet the RFS 

requirement in 2018, ethanol usage in the United States remains limited by the E10 

“blendwall.” The E10 blendwall refers to the industry’s limited ability to consume fuel 

blends containing more than 10 percent ethanol because most gas stations in the U.S. only 

offer E10 gasoline, which has 10 percent ethanol content. Market participants noted no 

significant change in the demand for E15 and E85 (gasoline with 15 percent and 85 percent 

ethanol content, respectively) since 2017.

 fossil fuel. 42 U.S.C. § 7545(o)(1)(B)(i). Advanced biofuels include, but are not limited to, cellulosic biofuel and 

biomass-based diesel. Id. § 7545(o)(1)(B)(ii)(I)-(VII). 10 Id. § 7545(o)(2)(B)(i)(I)-(II). 11 Id. § 7545(o)(2)(B)(i)(II)-(III). 12 The Clean Air Act provides EPA authority to adjust cellulosic, advanced and total volumes set by Congress as 

part of the annual rulemaking process. See Overview for Renewable Fuel Standard, 

https://www.epa.gov/renewable-fuel-standard-program/overview-renewable-fuel-standard (last visited Oct. 4, 2018). 13 Renewable Fuel Stand. Prgm., Final Renewable Fuel Standards for 2014, 2015, and 2016, and the Biomass-Based 

Diesel Volume for 2017, https://www.epa.gov/renewable-fuel-standard-program/final-renewable-fuel-standards2014-2015-and-2016-and-biomass-based (last visited Sept. 20, 2018). 14 Id. In 2016, the U.S. consumed 14.4 billion of these 14.5 billion gallons. See U.S. Energy Info. Admin., Monthly 

Energy Review, Table 10.3 Fuel Ethanol Overview, 

http://www.eia.gov/totalenergy/data/browser/xls.cfm?tbl=T10.03&freq=m (last visited Sept. 24, 2018). 15 Renewable Fuel Stand. Prgm., Final Renewable Fuel Standards for 2018, and the Biomass-Based Diesel Volume 

for 2018, https://www.epa.gov/renewable-fuel-standard-program/final-renewable-fuel-standards-2018-and-biomassbased-diesel-volume (last visited Oct. 4, 2018). The EPA’s volume requirements, like the statutory RFS, set a target 

for total renewable fuels and include a nested requirement for advanced biofuels. Thus, each gallon of fuel that 

meets the advanced biofuels requirement also counts toward the total renewable fuels requirements. Once obligated 

parties meet the minimum requirement for advanced biofuels, they may meet any remaining obligation under the 

total renewable fuels requirement with conventional corn ethanol. 
4

B. Margins

Reported average margins in the U.S. ethanol industry through the first eight months 

of 2018 followed a seasonal pattern similar to that seen in 2017.

16 Margins were low in 

January of 2018 but increased as demand surged during the spring and summer driving 

season.17 The average margin for the first eight months of 2018 was $0.25 per gallon.18 Over 

this period, the average net cost of corn – the largest ethanol input cost – was $0.72 per 

gallon.19 Ethanol prices fluctuated slightly throughout the first eight months of 2018, with an 

average price of $1.37 per gallon.

20 

Figure 1 shows net corn prices, ethanol prices, and return over operating costs for the 

period January 2012 through September 2018.

 16 See Iowa State University, Center for Agricultural and Rural Development, Historical Ethanol Operating Margins, 

http://www.card.iastate.edu/research/biorenewables/tools/hist_eth_gm.aspx (last visited Sept. 24, 2018). 17 Id. Margin, or return over operating costs, is the difference between the revenue from ethanol plants (including 

revenue from ethanol and dried distillers grains with solubles) and variable production costs (including corn, natural 

gas, and labor).

18 Id. This is higher than the average margin for the first eight months in 2017, which was $0.23 per gallon. 19 Id. The cost of corn peaked at $0.79 per gallon in July 2018 and reached a nadir of $0.64 per gallon in August 

2018. 20 Id. Ethanol prices reached a high of $1.46 per gallon in March 2018 and a low of $1.22 per gallon in August 

2018. The average price for the first eight months of 2017 was $1.45 per gallon.
5

Market Trends

Domestic ethanol production and capacity increased since last year’s Report. Domestic

ethanol production from July 2017 through June 2018 increased approximately 2.5 percent from 

the prior 12 months, from 15.6 billion to 16.0 billion gallons.21 Domestic ethanol production 

capacity (including capacity under construction) rose to approximately 17.3 billion gallons per 

year.22 This marks the fifth consecutive year of capacity increases.

23 

Ethanol exports have also increased. From July 2017 through June 2018, the U.S. 

exported approximately 1.6 billion gallons of ethanol, a 23 percent increase from the same 

period during the prior year.24 This marked the fifth consecutive year of increased ethanol 

exports.25 

Over 100 firms produce or are capable of producing ethanol. The largest ethanol 

producer’s share of domestic capacity is approximately 11 percent, unchanged from its 2017 

share.

26 

 21 U.S. Energy Info. Admin. (“EIA”), Monthly Energy Review, Table 10.3 Fuel Ethanol Overview, supra note 14. 22 Staff’s total capacity estimate takes into account information obtained through interviews with market participants 

and publicly available information, including information published online by the Renewable Fuels Association 

(“RFA”). See, e.g., RFA, Biorefinery Locations, http://www.ethanolrfa.org/resources/biorefinery-locations/ (last 

visited Oct. 3, 2018). To estimate capacity, staff used operating capacity rather than nameplate capacity, which led 

to an estimated total in excess of EIA’s published estimate of 16.3 billion gallons. U.S. Energy Info. Admin., U.S. 

Fuel Ethanol Plant Production Capacity (July 30, 2018), http://www.eia.gov/petroleum/ethanolcapacity/. EIA’s 

capacity data are a snapshot of capacity as of January 1 of each year and exclude plants that were idle, shut down, or 

still under construction as of that month. See U.S. Energy Info. Admin., EIA Releases U.S. Fuel Ethanol Production 

Capacity Data (Nov. 30, 2011), http://www.eia.gov/todayinenergy/detail.cfm?id=4110 (describing EIA’s method for 

calculating total capacity for its first annual reports). 23 U.S. Energy Info. Admin., U.S. Fuel Ethanol Production Capacity Continues to Increase (Aug. 1, 2018), 

https://www.eia.gov/todayinenergy/detail.php?id=36774. 24 U.S. Energy Info. Admin., U.S. Exports of Fuel Ethanol, 

http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=M_EPOOXE_EEX_NUS-Z00_MBBL&f=M (last 

visited Oct. 3, 2018) (noting the U.S. exported 38.6 million barrels of ethanol during this period).

25 Id. 26 See 2017 Ethanol Report, supra note 1, at 7.
6

III. Analysis

Section 1501(a)(2) of the Energy Policy Act of 2005 instructs the Commission to use 

HHIs to measure concentration in the U.S. ethanol production industry.27 HHIs can provide a 

snapshot of market concentration based upon the number of market participants and their 

respective sales, production, or capacity.28 An analysis of competition among market

participants using these HHIs assumes that the U.S. ethanol production industry is an appropriate 

antitrust market, a question that this Report does not address.

29 Such an assumption precludes 

consideration of a broader product market that includes other gasoline blending components that 

might be economically viable and environmentally acceptable substitutes for ethanol. In the 

event that ethanol competes with other blending components, HHIs based on a fuel ethanol 

market would understate the amount of competition in the industry. This assumption also 

precludes consideration of whether broader or narrower geographic markets than the United 

States could provide further insight about competition in ethanol production and marketing.

This Report presents four HHIs for the ethanol industry, calculated using two different 

measures of market share – production capacity and actual production – and two different 

methods of allocating those market shares by market participant. First, staff calculated market 

 27 Energy Policy Act of 2005 § 1501(a)(2), supra note 2. A given market’s HHI is the sum of the squares of the 

individual market shares of all market participants. For example, a four-firm market with market shares of 30 

percent, 30 percent, 20 percent, and 20 percent has an HHI of 2600 [(30*30) + (30*30) + (20*20) + (20*20) = 

2600]. HHIs range from 10,000 in a one-firm (pure monopoly) market to a number close to zero in a highly 

unconcentrated market.

28 The Commission and the U.S. Department of Justice regularly use HHIs to measure concentration in a relevant 

antitrust market as part of their analysis of the likely effects of a merger or acquisition on competition in that market. 

See Horizontal Merger Guidelines, supra note 6, § 5.3. 29 A relevant antitrust market has both product and geographic aspects. A relevant product market is a product or 

group of products such that a hypothetical profit-maximizing firm that was the only seller of those products likely 

could profitably impose at least a small but significant and nontransitory increase in price (“SSNIP”). If such a price 

increase would not be profitable because of the loss of sales to other products, the product or group of products 

would not be a relevant product market. Similarly, a relevant geographic market is a region such that a hypothetical 

profit-maximizing firm that was the only seller of the relevant product in that region likely could impose at least a 

SSNIP above the competitive level. If such a price increase would not be profitable because of the loss of sales to 

sellers outside the region, the region would be too narrow to be a relevant geographic market. See id. §§ 4.1-4.2. 
7

shares based on domestic ethanol production capacity. Staff then attributed the producer’s 

market share to (1) the producer itself and, separately, (2) the producer or the third-party firm 

that actually marketed the producer’s ethanol output. Staff relied on publicly available 

information and interviews with producers, marketers, and other industry participants to 

determine the production capacity of each ethanol plant and to calculate market shares based on 

marketing arrangements.

Second, the United States Energy Information Administration (“EIA”) staff calculated 

market shares based on actual production, attributing the market shares as described in the 

preceding paragraph. Due to the confidential nature of the ethanol production data the EIA 

collects, staff provided to EIA staff the information necessary to allocate market shares.30 EIA 

staff separately allocated shares by producer and by marketer to calculate production-based 

HHIs.31

A. Concentration with Market Shares Based on Production Capacity

For each of the HHI calculations described below, staff first calculated producers’ market 

shares based on their fuel ethanol production capacity.32 Production capacity provides a useful 

and easily confirmable indicator of a producer’s competitive significance.33 In determining each 

producer’s aggregate capacity, staff included the capacity of existing plants, as well as the 

projected capacity of plants currently under construction and plants currently undergoing

 30 For producers for which EIA maintains production data, staff provided EIA with the identities of those producers’ 

marketers. EIA used this information, in conjunction with its own data on ethanol production, to calculate the HHIs 

that attribute market share to marketers.

31 Because the production data are confidential, EIA staff did not disclose the volumes of ethanol attributable to any 

individual producer or the market shares based on those volumes. 32 The RFA’s website provides frequently updated data on ethanol plant capacity and capacity expansion plans. 

Capacity information is also available on many individual producers’ websites, some of which also provide details 

of construction and expansion plans. 33 See Horizontal Merger Guidelines, supra note 6, § 5.2. In markets for homogeneous products (such as ethanol), a 

firm may derive its competitive significance primarily from its available capacity – i.e., its ability and incentive to 

increase production in the event of a competitor’s price increase or output reduction. Id.
8

expansion.34 Incorporating capacity from such projects into current market share calculations is 

consistent with the approach set forth in the Horizontal Merger Guidelines.35

1. Attributing Market Shares to Producers

Under the first approach to market concentration, staff allocated market share to each 

producer based on the producer’s percentage of total production capacity. This method of 

calculation yielded an HHI of 480, a level regarded as unconcentrated under the Horizontal 

Merger Guidelines.36 This HHI is the same as the corresponding HHI of 480 in 2017.

37

2. Attributing Market Shares to Marketers

Many producers enter into marketing agreements with third parties to market their 

ethanol to blenders and end users, while other producers sell their output directly. An ethanol 

marketer may represent and make limited decisions for multiple individual producers, essentially 

aggregating these producers’ capacities under a single entity. For purposes of competitive 

analysis, attributing production capacity to marketers rather than to the actual producers provides 

 34 Staff included the capacity of these construction and expansion projects only where the producer had finalized 

construction plans, received the necessary financing for construction, and begun physical construction. Ethanol

producers frequently announce capacity additions, new plants, plant sales, and cancellations of plans to build new 

capacity. These HHI calculations represent staff’s best estimate of the industry’s concentration as of September 

2018, the cut-off date for our analysis unless otherwise indicated. This approach therefore excludes any more recent 

publicly available information that might be relevant to industry HHI calculations. These HHI calculations also

might not capture the full complexity of industry ownership structures, especially the degree of control by minority 

interests held by marketers or third-party management service firms. However, the HHI resulting from allocating 

production to the marketer should capture any such complexity not reflected in the producer HHI. 35 See Horizontal Merger Guidelines, supra note 6, § 5.1. Firms that are not currently producing but likely would 

respond rapidly in the event of a SSNIP have competitive significance even though they do not currently supply the 

relevant market. Id. 36 See Horizontal Merger Guidelines, supra note 6, § 5.3. 37 See Figure 2. Although the HHI is unchanged from 2017, the industry continued to experience shifts in plant 

capacity through plant expansions, conversions, openings, and closures over the past 12 months. Because the HHI 

captures these adjustments in the aggregate, it ignores the individual activity of industry participants. For example, 

the HHI may include a producer’s acquisition of another producer’s facilities that coincided with the restart or 

reconstruction of an idled facility. Alternatively, the HHI may exclude a plant that was converted to other uses, 

formally closed, or judged unlikely to reopen in the near future.
9

a measure of industry concentration that captures this aggregation. For producers that engage in 

direct sales, staff attributed the market shares to the producers themselves.38

This approach yields an HHI of 731, unconcentrated under the Horizontal Merger 

Guidelines. This HHI is slightly higher than the corresponding HHI of 699 in 2017.

39

B. Concentration with Market Shares Based on Actual Production

Firms that produce more than eight million gallons of oxygenates (such as ethanol) per 

year must report to EIA their monthly production volumes by product. Using production data is 

instructive because capacity data have certain limitations, particularly insofar as stated capacity 

does not necessarily represent actual production capabilities. Ethanol plants often can produce as 

much as 10 to 15 percent more than their stated design capacities and tend to operate at 

increasing rates as their owners and operators improve the production process and gain expertise 

in operating their plants.40 In this respect, actual production may reflect a market participant’s 

competitive significance more accurately than would its plants’ capacities.

There are some limitations on the accuracy of HHIs based on actual production, just as 

there are limitations on capacity-based HHIs. HHIs based on production over a given period 

may overstate or understate actual concentration due to entry and exit of firms, expansion of 

existing capacity, and variations in capacity utilization rates during the relevant period. 

Specifically, the production-based HHIs provided below do not fully reflect the impact of new 

facilities that began production during the last 12 months, nor do they fully reflect the impact of 

plant closures and idling during the period. In both cases, these facilities produced only a 

fraction of what they otherwise could produce in a full year, leading to an understatement (in the 

 38 Some marketers publicly announce new agreements with producers. Where staff could not determine whether a 

producer marketed for itself or used an outside marketing firm, staff attributed market share to the producer.

39 See 2017 Ethanol Report, supra note 1, at 9. 40 Similarly, some ethanol producers may not be in a position to utilize their full plant capacity. Actual production 

may be a better indicator of their competitive significance in such cases.
10

case of new facilities) or an overstatement (in the case of idled facilities) of their competitive 

significance in the market. Similarly, the HHIs below do not account for the effects on 

concentration of plant expansions within the last 12 months and capacity-enhancing 

improvement projects that are not yet in operation.

These production-based HHIs reflect actual production volumes from July 2017 through 

June 2018. Where EIA attributed the actual production market share directly to individual 

producers, the resulting HHI is 459, slightly lower than the 2017 HHI of 475.

41 The productionbased HHI calculated by attributing the market share of each producer to the firm that markets 

for that producer results in an HHI of 759, greater than the 2017 HHI of 719.

42

C. Entry and Imports

The U.S. ethanol industry is unconcentrated today, suggesting that any unilateral or 

coordinated attempt to exercise market power is highly unlikely. Should the industry become 

more concentrated, the possibility of new firms entering the domestic market and the 

responsiveness of ethanol imports to relative changes in domestic ethanol prices would likely 

provide additional constraints on anticompetitive behavior by domestic firms. Potential entrants 

can purchase and restart existing production facilities that were idled due to recent economic 

conditions or can design and build new plants to enter the market.

Ethanol import levels historically have responded to fluctuations in the price of U.S. 

ethanol relative to foreign ethanol prices, particularly prices for sugarcane-based ethanol from 

Brazil.43 This responsiveness would likely constrain any potential exercise of market power by a 

 41 2017 Ethanol Report, supra note 1, at 10. 42 Id. 43 Brazil has been the largest exporter of ethanol to the United States every year since 2011. See U.S. Energy Info. 

Admin., U.S. Imports by Country of Origin, 

https://www.eia.gov/dnav/pet/pet_move_impcus_a2_nus_epooxe_im0_mbbl_a.htm (last visited Oct. 3, 2018). 

Though the United States is a net exporter of ethanol, demand exists for imported ethanol with low greenhouse gas 
11

domestic firm. Additionally, to the extent U.S. prices increase because of the exercise of market 

power among a group of U.S. producers or marketers, it is likely that other producers would 

react by exporting less to take advantage of more favorable U.S. ethanol prices (thereby 

increasing U.S. supply).

IV. Conclusion 

Regardless of the particular measure of market share or the market share allocation 

method used to calculate concentration, ethanol production remains unconcentrated. The 

industry is less concentrated today than it was at the time of the first ethanol market 

concentration report in 2005. Furthermore, the possibility of entry and the availability of ethanol 

imports provide additional constraints on the exercise of market power by current industry 

participants. The low level of concentration and large number of market participants in the U.S. 

ethanol production industry continue to suggest that the exercise of market power to set prices, or 

coordination on price and output levels, is unlikely.

 

emissions, such as sugar-cane-based ethanol. See U.S. Energy Info. Admin., U.S. Exported a Record Amount of 

Fuel Ethanol in 2017 (Apr. 27, 2018), https://www.eia.gov/todayinenergy/detail.php?id=35972.
12

Figure 2: Domestic Fuel Ethanol Concentration44

Concentration Based on Capacity 2017 HHI 2018 HHI

Shares attributed to each producer 480 480

Shares attributed to marketers for all marketing agreements 699 731

Concentration Based on Production 2017 HHI 2018 HHI

Shares attributed to each producer 475 459

Shares attributed to marketers for all marketing agreements 719 759

Note: Capacity for 2017 includes the capacity as of September 2017 and the capacity additions 

under construction and expected completions within 12 to 18 months after September 2017. 

Capacity for 2018 includes the capacity as of September 2018 and the capacity additions under 

construction and expected completions within 12 to 18 months after September 2018. Production 

data for 2017 are from July 2016 through June 2017; production data for 2018 are from July 2017

through June 2018.

 44 See 2017 Ethanol Report, supra note 1, at 13.
13

Note: Annual figures are for operable capacity and capacity under 

construction at year-end for 1998 to 2004, and as of October for 

2005 to 2018. The HHI figures shown are capacity-based, with 

market share attributed to the producer. 

0

500

1000

1500

2000

2500

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

19982000200120022003200420052006200720082009201020112012201320142015201620172018

Figure 3: Historical Fuel Ethanol Capacity and 

HHIs

Capacity (Left Axis)

HHI (Right Axis)