1 

2014 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 2014.1 Section 1501(a)(2) of the 

Energy Policy Act of 2005 requires the FTC each year to “perform a market concentration 

analysis of the ethanol production industry using the Herfindahl-Hirschman Index to determine 

whether there is sufficient competition among industry participants to avoid price-setting and 

other anticompetitive behavior.”2 The statute also requires the FTC to consider all marketing 

arrangements among industry participants in preparing its analysis.3 The FTC must report its 

findings to Congress and to the Administrator of the Environmental Protection Agency (“EPA”) 

by December 1.4

As in previous reports, FTC staff (“staff”) prepared Herfindahl-Hirschman Index (“HHI”) 

calculations for the U.S. ethanol production industry using two different measures of market 

share – production capacity and actual production. In previous years, staff calculated market 

shares by attributing share to (1) each producer; (2) each producer or the third-party firm that 

marketed that capacity; and (3) the third-party marketer alone if that marketer sold production 

volumes pursuant to a pooling agreement. The industry no longer uses such pooling agreements; 

thus, this Report does not measure concentration on this basis. Based on production capacity, the 

 

1

 Prior Ethanol Reports are available on the FTC’s website. See FTC, Oil and Gas Industry 

Initiatives, Competition Policy: Reports, available at http://www.ftc.gov/tipsadvice/competition-guidance/industry-guidance/oil-and-gas. This Report builds upon 

Commission reports from previous years, which contain relevant background information that 

this Report does not repeat. 

2

 Energy Policy Act of 2005, Pub. L. No. 109-58, § 1501, 119 Stat. 594, 1074 (2005) (amended 

2007). For purposes of this Report, we presume that Congress used the term “price-setting” to 

mean “price fixing.” 

3 Id. 4 Id. 
2 

HHIs for the domestic ethanol production industry range from 333 to 693, depending on the 

method of market share allocation. Based on actual production, the HHIs range from 343 to 743. 

Compared to the HHI levels in 2013, the level of concentration in the U.S. ethanol industry in 

2014 has increased slightly. 

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

production industry suggest that exercise of market power to set prices or coordination on price 

or output levels is unlikely. As has been the case each year since the Commission began 

reporting, each of the 2014 HHIs indicates that the industry is unconcentrated. At this level of 

concentration, a single ethanol producer or marketer lacks market power. Successful 

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

and thus would be unlikely. Imports and the possibility of entry would also act as a serious 

impediment to exercise of market power by any group of domestic firms. 

II. Recent Industry Developments 

 A. Renewable Fuel Standard

Congress requires the domestic consumption of minimum annual volumes of 

renewable fuels, including fuel ethanol. The Energy Policy Act of 2005 originally established 

this minimum, which we know as the Renewable Fuel Standard (“RFS”).5

 The Energy 

Independence and Security Act of 2007 amended the RFS, significantly increasing the 

minimum volumes – including a 2014 requirement of 18.15 billion gallons of ethanol – and 

extending the annual mandate to a peak requirement of 36 billion gallons in 2022.6

 

5

 Energy Policy Act of 2005 § 1501, 119 Stat. 1069. 

6

 Energy Independence and Security Act of 2007, 42 U.S.C. § 7545(o)(2)(B)(i)(I) (2014). 
3 

The annual RFS mandate for renewable fuels is increasing faster than the market’s 

ability to consume ethanol. Nearly all gasoline sold in the United States today is E10,7 and 

the industry’s limited ability to provide and consume higher blends is known as the E10 blend 

wall.8

 The 2014 statutory goal of 18.15 billion gallons exceeds the achievable overall ethanol 

production and use given current motor vehicle fuel demand with E10 blending and estimated 

year-end operable ethanol capacity of 15.6 billion gallons.9 The EPA subsequently modified 

the proposed consumption of all renewable fuels to 15.2 billion gallons. Fuel ethanol 

represents approximately 13 billion gallons of that total – a level attainable with E10 blending 

at current gasoline demand levels plus the moderate use of banked credits for previous ethanol 

consumption exceeding required levels.10 While the EPA has not finalized the requirements 

for 2014, some observers believe the final 2014 rule could raise the target somewhat.11

The RFS also sets targets for cellulosic ethanol. The 2013 target was approximately 1 

billion gallons, and the 2014 target was 1.75 billion gallons.12 Cellulosic ethanol production 

capacity, however, has been slower to develop than anticipated. Consequently, the EPA has 

 

7 See EPA, EPA Proposes 2014 Renewable Fuel Standards/Proposal Seeks Input to Address 

“E10 Blend Wall,” Reaffirms Commitment to Biofuels (Nov. 15, 2013), 

http://yosemite.epa.gov/opa/admpress.nsf/bd4379a92ceceeac8525735900400c27/81c99e6d27c7

30c485257c24005eecb0!opendocument. 8 See 2014 Renewable Fuel Standard, Proposed Rule, 78 Fed. Reg. 71732 (Nov. 29, 2013). 

9

 These figures take into account information obtained through interviews with market 

participants and publicly available information, including information from the RFA website. 

See, e.g., RFA, Biorefinery Locations, http://ethanolrfa.org/bio-refinery-locations/ (last modified 

Nov. 6, 2014). 

10 The EPA uses Renewable Identification Numbers (“RINs”) to track compliance with the RFS. 

See 2013 Report on Ethanol Market Concentration 3 (2013) (“2013 Ethanol Report”). Based on 

EPA estimates, there will be 1.2 billion banked RINs available for use in 2014. See 2014 

Renewable Fuel Standard, Proposed Rule, supra note 8. 

11 Scott Irwin, Rolling Back the Write Down of the Renewable Mandate for 2014: The RINs 

Market Rings the Bell Again, Farmdocdaily (Aug 7, 2014), 

http://farmdocdaily.illinois.edu/2014/08/rolling-back-the-write-down-of-renewable-mandate2014.html (last viewed Oct. 19, 2014). 

12 See 2014 Renewable Fuel Standards, Proposed Rule, supra note 8. 
4 

set cellulosic biofuel volumes for 2013 significantly below the statutory levels.13 With 

additional capacity coming on line in late 2014, the EPA proposed to set the cellulosic biofuel 

volumes for 2014 at 17 million gallons, a rate still far below the statutory levels. The EPA 

proposal appears to match likely cellulosic production for 2014.14 

In 2012, the EPA approved E15 for vehicles built since the 2001 model year.15 As 

explained in the 2012 Ethanol Report, the industry faces significant hurdles before the market 

can consume significant volumes of higher ethanol-gasoline blends.16 These barriers, which 

include coverage under car manufacturers’ warranties and the establishment of a distribution 

infrastructure, continue to limit consumption of E15.17 Small increases or even declines in motor 

gasoline consumption – and therefore changes in the pool available for blending – also fall short 

of the levels needed to meet annual increases in the RFS requirements.18 

 

13 See 2013 Renewable Fuel Standards, 78 Fed. Reg. 49794 (Aug. 15, 2013) (codified at 40 

C.F.R. Part 80), at 49800-801. 

14 See 2014 Renewable Fuel Standards, Proposed Rule, supra note 8. The POET-DSM plant in 

Emmetsburg, Iowa (40 million gallons a year (“mgy”)) held its grand opening in September 

2014. Two other commercial cellulosic plants are nearing completion: the Abengoa plant in 

Hugoton, Kansas (23 mgy), and the DuPont plant in Nevada, Iowa (30 mgy). EIA, Commercialscale Cellulosic Ethanol Plant Opens (Sept. 5, 2014), 

http://www.eia.gov/todayinenergy/detail.cfm?id=17851. All three plants are expected to 

commence production as the corn harvest is completed and corn waste becomes available. Other 

plants are in various stages of development. 

15 See EPA, Fuels and Fuel Additives, E15 (A Blend of Gasoline and Ethanol), 

http://www.epa.gov/otaq/regs/fuels/additive/E15/ (last modified Aug. 2, 2013) (describing 

EPA’s approval of E15). 

16 See 2012 Report on Ethanol Market Concentration 5. 

17 Additional infrastructure is also required to consume greater volumes of gasoline blends 

with up to 85 percent ethanol, known as E85. Currently, about 2 percent of all retail stations 

in the United States offer E85. See EIA, Today in Energy, Access to Alternative 

Transportation Fuel Stations Varies Across the Lower 48 States (Apr. 30, 2012), 

http://www.eia.gov/todayinenergy/detail.cfm?id=6050&src=email#tabs AltTransportFuelStatio

n; EIA, Today in Energy, E85 fueling station availability is increasing (Mar. 7, 2014), 

(http://www.eia.gov/todayinenergy/detail.cfm?id=15311). 18 See 2014 Renewable Fuel Standards, Proposed Rule, supra note 8. 
5 

 B. Margins

As in prior years, fuel ethanol prices and costs have been volatile throughout the 

reported period, leading to wide margin variations. Despite higher prices for ethanol and 

byproducts, such as distillers dried grain, high corn prices in the second half of 2012 kept 

producers from covering rising costs. As margins continued near break-even or fell to negative 

values, domestic ethanol producers reduced operating rates and idled some plants.19 As 

production and inventory levels fell, ethanol prices increased.20 Ethanol margins began to 

increase moderately in the first half of 2013, then rose substantially in late 2013 and generally 

kept increasing through 2014.21 Chart 1 plots the changes in corn prices, ethanol prices, and 

plant operating margins for the period 2010 to mid-2014. 

 

19 See EIA, Today in Energy, Ethanol Producers Respond to Market Conditions (Mar. 11, 2013), 

http://www.eia.gov/todayinenergy/detail.cfm?id=10311. 20 EIA, Weekly U.S. Ending Stocks of Fuel Ethanol, 

http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=W_EPOOXE_SAE_NUS_MBB

L&f=W (last modified Sept. 4, 2014); 

EIA, Weekly U.S. Oxygenate Plant Production of Fuel Ethanol, 

http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=W_EPOOXE_YOP_NUS_MBB 

LD&f=W (last modified Aug. 28, 2013); 

Iowa State University, Agricultural Marketing Resource Center, Weekly Ethanol, Distillers 

Grain, and Corn Prices, 

http://www.extension.iastate.edu/agdm/energy/xls/agmrcethanolplantprices.xlsx, (last modified 

Sept. 15, 2014); The Chicago Board of Trade Prompt Month corn contract price for October 

2012 closed at $7.56/bushel, and the September 2014 contract closed at $3.19/bushel. 

TradingCharts.com, Historical Monthly Commodity Futures Price Chart: Corn (CBOT), 

http://futures.tradingcharts.com/chart/CN/M, (last viewed Oct 19, 2014). 21 The economic model of Iowa State University’s Center for Agricultural and Rural 

Development (“CARD”) estimated that the typical Iowa ethanol producer lost an estimated 

$.05/gallon in December 2012, measured by the margin over or below variable cost. By April 

2013, estimated variable margins had risen to a profit of $0.38/gallon and increased further to 

$1.14/gallon in April 2014. “The return over operating costs is one signal of the level of 

profitability to producing ethanol.” CARD, Iowa State University, Historical Ethanol Operating 

Margins, http://www.card.iastate.edu/research/bio/tools/hist_eth_gm.aspx (last viewed Oct. 22 

2014). 

7

A decrease in corn prices by more than half from peak 2012-2013 levels ($8.15 per 

bushel in August 2012 to $3.09 per bushel in late September 2014) and strong exports 

were the principal causes of the recent increase in profits.22 Ethanol profit margins 

increased, leading to a 9.3 percent increase in ethanol production from the previous year. 

Output of ethanol-blended gasoline also rose.23 Ethanol inventory levels increased by 

about 100 million gallons between June 2013 and June 2014.24 In the wake of Brazil’s 

ethanol production problems, U.S. imports from that nation decreased by 40 percent.25 

The fall in imports, coupled with higher demand elsewhere in the world, made the United 

States a net exporter of 500 million gallons of ethanol from July 2013 to June 2014.26

The lower margins of 2012, followed by a revival in 2013, affected industry 

structure. Consolidation occurred between mid-2012 and mid-2014, as more than a dozen 

plants (with a combined capacity of more than 900 million gallons a year) were acquired 

by existing producers. As ethanol margins improved from mid-2013 to September 2014, 

at least six long-closed ethanol plants reopened, some after extensive renovation. Another 

 

22 See EIA, Today in Energy, Abundant 2013 Corn Harvest Boosts Ethanol Production (Dec. 13, 

2013), http://www.eia.gov/todayinenergy/detail.cfm?id=14171; Price data: CARD, Iowa State 

University, Historical Ethanol Operating Margins, 

http://www.card.iastate.edu/research/bio/tools/hist eth gm.aspx (last viewed Oct 19, 2014). 

23 Derived from EIA data. See EIA, Monthly Energy Review (Sept. 2014), Table 10.3, available 

at http://www.eia.gov/totalenergy/data/monthly/archive/00351409.pdf. 24 See EIA, Ending Stocks of Fuel Ethanol, supra note 20. 

25 See EIA, Today in Energy, U.S. Ethanol Imports from Brazil Down in 2013, 

http://www.eia.gov/todayinenergy/detail.cfm?id=16131 (May 5, 2014). 

26 See EIA, U.S. Exports of Fuel Ethanol, 

http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=m_epooxe_eex_nusz00_mbbl&f=m (last modified Oct. 30, 2014). 
8

large plant, now shut down and under renovation, should reopen in 2015, adding more 

capacity.27

The industry also faced logistical issues this past year. Some producers, particularly in 

the upper Midwest, were temporarily unable to meet production and shipment goals due to rail 

system and weather problems. Extreme winter temperatures and snow caused congestion in 

Midwestern rail terminals, delaying shipments and resulting in significant ethanol stock draws 

and some short-term plant closings.28 A strong demand for ethanol exports in the winter months 

(238 million gallons) also may have contributed to the problem, with longer shipping distances 

to ports extending the cycle time of rail cars.29 These problems apparently persisted somewhat 

through the summer, with some ethanol plants operating at reduced rates due to constrained rail 

car operability. 

III. Summary of Market Trends 

 Domestic ethanol production increased since last year’s Report, while production 

capacity remained the same. Domestic ethanol production from July 2013 through June 2014 

increased approximately 8.6 percent from the prior 12 months, from 12.8 billion to 13.9 billion 

gallons.30 Domestic ethanol production capacity (including capacity under construction) 

remained constant at approximately 15.6 billion gallons per year.31

 

27 Six other plants either converted to other uses or permanently closed. The future of a few 

other long-closed (or never operational) plants is unclear. These plants are not included in this 

Report. 

28 See EIA, This Week In Petroleum, Rapid Rise in Ethanol Prices Since Early February Reflects 

Logistical Problems, http://www.eia.gov/petroleum/weekly/archive/2014/140402/twipprint.html

(Apr 2, 2014); EIA, Weekly U.S. Ending Stocks of Fuel Ethanol, supra note 20. 

29 See EIA, U.S. Exports of Fuel Ethanol, supra note 26. 

30 See EIA, Monthly U.S. Oxygenate Plant Production of Fuel Ethanol, 

http://www.eia.doe.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=m epooxe yop nus 1&f=m 

(last modified Sept. 29, 2014). However, overall production increased over 800 percent between 

2000 and 2014. See RFA, Battling for the Barrel: 2013 Ethanol Industry Outlook 3 (2013), 
9

 The number of firms producing ethanol has decreased slightly since last year’s Report. 

As of September 2014, 148 firms produce or likely will begin producing ethanol within the next 

12 to 18 months, compared to 156 firms in 2013. The largest ethanol producer’s share of 

domestic capacity is 10.9 percent, unchanged from its percent share in 2013.32

IV. Analysis 

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

measure concentration in the U.S. ethanol production industry using HHIs.33 HHIs can provide a 

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

respective sales, production, or capacity.34 An analysis of competition among market 

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

antitrust market.35 This assumption precludes consideration of a broader relevant product market 

 

available at http://ethanolrfa.org/page/-

/PDFs/RFA%202013%20Ethanol%20Industry%20Outlook.pdf?nocdn=1. 31 See supra note 9. 

32 See 2013 Ethanol Report supra note 10, at 8. 

33 Energy Policy Act of 2005 § 1501, 119 Stat. 1074. 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. 

34 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 U.S. Department of Justice and Federal 

Trade Commission Horizontal Merger Guidelines (2010) (“Horizontal Merger Guidelines”) § 

5.3, available at http://ftc.gov/os/2010/08/ 100819hmg.pdf. 35 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 
10

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 a broader or 

narrower relevant geographic market than the United States that could provide further insight 

about competition in ethanol. 

 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. First, staff calculated market shares based on 

domestic ethanol production capacity. In previous reports, staff attributed the producer’s market 

share to: (1) the producer itself; (2) the producer or the third-party firm that actually marketed 

the producer’s ethanol output; and (3) the third-party marketing firm only if that firm marketed 

the producer’s volumes pursuant to a pooling agreement (and, absent such a pooling agreement, 

to the producer). Pooling agreements, however, are no longer common in the industry today, and 

thus they no longer provide a meaningful way to allocate market share. Thus, this Report does 

not measure concentration on this basis. 

 Second, 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, FTC staff provided to EIA staff the information 

necessary to allocate market shares. 36 EIA staff performed each of the two HHI calculations 

 

narrow to be a relevant geographic market. See Horizontal Merger Guidelines, supra note 34, 

§§4.1-4.2. 

36 For producers for which EIA maintains production data, FTC staff provided EIA with the 

identity 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. 
11

and provided the resulting production-based HHIs to our staff.37 FTC 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 the market shares 

based on marketing arrangements. 

 A. Concentration with Market Shares Based on Production Capacity

 For each of the HHI38 calculations described below, staff first calculated producers’ 

market shares based on their fuel ethanol production capacity.39 Production capacity provides a 

useful and easily confirmable indicator of a producer’s competitive significance.40 In 

determining the aggregate capacity of each producer, staff included the capacity of existing 

plants, as well as the projected capacity of plants currently under construction and plants 

 

37 Because the production data are confidential, EIA staff did not disclose to FTC staff the 

volumes of ethanol attributable to any individual producer or the market shares based on those 

volumes. 

38 The Commission and the U.S. Department of Justice characterize markets in which the HHI is 

below 1500 as unconcentrated. HHIs between 1500 and 2500 indicate moderately concentrated 

markets, which may or may not raise competitive concerns in the context of a horizontal merger 

or acquisition. Markets with HHIs over 2500 are highly concentrated, and horizontal mergers or 

acquisitions in such markets are more likely to pose competitive concerns. See Horizontal 

Merger Guidelines, supra note 34, § 5.3. 

39 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. 

40 See Horizontal Merger Guidelines, supra note 34, § 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.
12

currently undergoing expansion.41 Incorporating capacity from such projects into current market 

share calculations is consistent with the approach set forth in the Horizontal Merger Guidelines.42

 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 333, a level regarded as unconcentrated under the Horizontal 

Merger Guidelines.43 This HHI is slightly higher from last year’s HHI of 290.44

 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 

 

41 Staff included the capacity of these plant construction and expansion projects only where the 

producer had finalized construction plans, received the necessary financing for construction, and 

begun physical construction. 

42 See Horizontal Merger Guidelines, supra note 34, § 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.

43 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 2014, 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. 

44 2013 Ethanol Report, supra note 10, at 10. Some of the change to the HHI may be attributable 

to a producer’s acquisition of another producer’s facilities. In several instances, these 

acquisitions coincided with the restart or reconstruction of an idled facility. Some of the change 

to the HHI may also be attributable to excluding plants that were converted to other uses, 

formally closed, or judged unlikely to reopen in the near future. 
13

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

engage in direct sales, staff attributed the market shares to the producers themselves.45

 This approach yields an HHI of 693, unconcentrated under the Horizontal Merger 

Guidelines. This HHI is higher than the corresponding HHI of 586 in 2013.46 

 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.47 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 deconcentrating 

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

 

45 Some marketers publicly announce new agreements with producers, providing staff with the 

information necessary to attribute a producer’s market share to the correct marketing firm when 

appropriate. In some instances, staff was unable to determine whether a producer marketed for 

itself or used an outside marketing firm. In these instances, staff attributed market shares to the 

producers. 

46 2013 Ethanol Report, supra note 10, at 11. 

47 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. 
14

the concentrating impact of plant closures and idlings during the period. In both cases, these 

facilities will have produced only a fraction of what they otherwise would produce in a full year, 

leading to an understatement (in the 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 2013 through 

June 2014. Where EIA attributed the actual production market share directly to individual 

producers, the resulting HHI is 343, slightly higher than the 2013 HHI of 328. 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 743, also slightly higher than the 2013 HHI of 687.48

 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 re-start existing production facilities that were either unfinished or idled due to 

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

 Additionally to the extent prices increase because of 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. Additional ethanol may also come 

 

48 See 2013 Ethanol Report, supra note 10, at 13. 
15

into the United States as import levels respond to fluctuations in the price of U.S. ethanol relative 

to foreign ethanol prices, particularly prices for sugar cane-based ethanol from Brazil.49 

V. 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 Report on Ethanol Market 

Concentration 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. These dynamics make it extremely unlikely that a single ethanol producer or 

marketer or a group of such firms could exercise market power to set prices or coordinate on 

price or output levels. 

 

49 The expiration of the ethanol import tariff of $0.54 per gallon at the end of 2011 has made 

Brazilian fuel ethanol more cost-competitive relative to domestic production. See 2013 

Renewable Fuel Standards, supra note 13, at 49818. For example, Brazilian producers 

responded to the high cost of U.S. corn in the second half of 2012 by exporting record amounts 

of ethanol into the United States. See EIA, U.S. Imports from Brazil of Fuel Ethanol, 

http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MFEIM_NUS-NBR_1&f=M

(last modified Oct.30, 2014); 2013 Renewable Fuel Standards, supra note 13, at 49818. 
16

Figure 1: Domestic Fuel Ethanol Concentration50

Concentration Based on Capacity 2013 HHI 2014 HHI

Shares attributed to each producer 290 333 

Shares attributed to marketers for all marketing agreements 586 693 

Concentration Based on Production 2013 HHI 2014 HHI

Shares attributed to each producer 328 343 

Shares attributed to marketers for all marketing agreements 687 743 

Source: Production HHIs from EIA 

Note: Capacity for 2013 includes the current capacity as of September 2013 and the capacity 

additions under construction and expected to be completed within 12 to 18 months after 

September 2013. Capacity for 2014 includes the current capacity as of September 2014 and the 

capacity additions under construction and expected to be completed within 12 to 18 months after 

September 2014. Production data for 2013 are from July 2012 through June 2013, and 

production data for 2014 are from July 2013 through June 2014. 

 

50 As discussed in note 38, supra, the Commission and the Department of Justice characterize 

markets with HHIs below 1500 as unconcentrated. HHIs between 1500 and 2500 indicate 

moderately concentrated markets, and HHIs over 2500 indicate highly concentrated markets that 

are more likely to pose competitive concerns. An increase in the HHI of less than 100 points is 

unlikely to have adverse competitive effects. Horizontal Merger Guidelines, supra note 34, § 

5.3.