1

2017 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 2017.

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. For each analysis, staff calculated HHIs two 

different ways, first by allocating market shares among producers and then by allocating market 

shares among marketers. Under either approach, concentration based on producer shares is 

lower than concentration based on marketer shares. Based on capacity, the HHIs are 480 for 

producer-based shares and 699 for marketer-based shares. Based on actual production, the HHIs 

are 475 for producer-based shares and 719 for marketer-based shares. Concentration is

substantially unchanged from a year ago. 

 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.
2

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.

5 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.

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.6 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.

7

 For 2017, the RFS mandates 24.0 billion gallons of renewable fuel, 15.0

billion gallons of which can be conventional corn ethanol.

8

 The 2017 advanced biofuels 

target is 9.0 billion gallons, at least 5.5 billion gallons of which must be cellulosic biofuel.9 

 5 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. 6 See Energy Policy Act of 2005 § 1501, 119 Stat. 1069. 7 “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 

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). 8 Id. § 7545(o)(2)(B)(i)(I)-(II). 9 Id. § 7545(o)(2)(B)(i)(II)-(III).
3

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

requirements, prompting the EPA to decrease the requirements.

10 The EPA published these 

revised requirements in 2016,11 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

towards the 2016 RFS.12 For 2017, the EPA required 19.3 billion gallons of total renewable 

fuels, 15.0 billion gallons of which can be conventional corn ethanol.13 

While market participants believe the U.S. ethanol industry will produce more than the 

RFS requirement in 2017, 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. offer 

E10 gasoline, which has 10 percent ethanol content. Market participants noted an increase in 

the number of service stations offering E15 and E85 (gasoline with 15 percent or 85 percent

ethanol content), but nationally their availability remains limited.14

 10 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-standards2017-and-biomass-based-diesel-volume (last visited Sept. 29, 2017). 11 Renewable Fuel Stand. Prgm., Final Renewable Fuel Standards for 2017, and the Biomass-Based Diesel Volume 

for 2018 https://www.epa.gov/renewable-fuel-standard-program/final-renewable-fuel-standards-2014-2015-and2016-and-biomass-based (last visited Sept. 29, 2017). 12 Id. In 2016, the U.S. consumed 14.4 billion of these 14.5 billion gallons. 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. 15, 2017). 13 Renewable Fuel Stand. Prgm., Final Renewable Fuel Standards for 2017, and the Biomass-Based Diesel Volume 

for 2018, supra note 11. 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. 

14 See, e.g., James Osborne, Ethanol Triggers Energy Battle, San Antonio Express-News (June 27, 2017), 

http://www.expressnews.com/business/eagle-ford-energy/article/Ethanol-triggers-energy-battle-11250743.php (“The 

vast majority of gas stations in the United States only sell gasoline with a 10 percent concentration of ethanol” and 

“[m]ost retailers have hesitated to sell 15 percent concentrations.”).
4

B. Margins

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

of 2017 followed a seasonal pattern similar to that seen in 2016.

15 Margins were low, and 

occasionally negative, in January of 2017 but increased and remained positive as demand 

surged during the spring and summer driving season.16 The average margin for the first eight 

months of 2017 was $0.23 per gallon.

17 Over this period, the average net cost of corn – the 

largest ethanol input cost – was $0.81 per gallon.18 Ethanol prices have fluctuated slightly 

throughout the first eight months of 2017, with an average price of $1.45 per gallon.

19 

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

period January 2012 through September 2017.

 15 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. 15, 2017). 16 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).

17 Id. This is higher than the average margin for the first eight months in 2016, which was $0.18 per gallon. 18 Id. The cost of corn peaked at $0.95 per gallon in January 2017 and reached a nadir of $0.69 per gallon in August

2017. 19 Id. Ethanol prices reached a low of $1.25 per gallon in January 2017 and a high of $1.60 per gallon in April 2017. 

The average price for the first eight months of 2016 was $1.39 per gallon.
5

C. Market Trends 

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

ethanol production from June 2016 through May 2017 increased approximately four percent

from the prior 12 months, from 15.0 billion to 15.6 billion gallons.

20 Domestic ethanol 

production capacity (including capacity under construction) rose to approximately 16.6 billion

gallons per year.21 This marks the fourth consecutive year of capacity increases.22 

 

20 U.S. Energy Info. Admin., Monthly Energy Review, Table 10.3 Fuel Ethanol Overview, supra note 12. 21 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 Sept. 29, 2017). 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 15.5 billion gallons. U.S. Energy Info. Admin., 

U.S. Fuel Ethanol Plant Production Capacity (June 20, 2017), 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 

4

3.5

3

2.5

2

1.5

1

0.5

0

1/3/2012 1/3/2013 1/3/2014 1/3/2015 1/3/2016 1/3/2017

-0.5

Figure 1: Fuel-Ethanol Price, Corn Cost, and Operating Margin Jan. 2012 to Sept. 2017

Ethanol Price ($/gallon)

Return Over Operating Costs ($/gallon)

Net Cost of Corn ($/gallon) Data from 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. 15, 2017). 
6

Ethanol exports have also increased. From July 2016 through June 2017, the U.S. 

exported 1.3 billion gallons of ethanol, a 40 percent increase from the same period during the 

prior year.23 This marked the fourth consecutive year of increased ethanol exports.24 

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 2016

share.

25 

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.

26 HHIs can provide a 

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

respective sales, production, or capacity.27 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.

28 Such an assumption precludes 

 

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).

22 U.S. Energy Info. Admin., U.S. Fuel Ethanol Production Continues to Grow in 2017 (July 21, 2017), 

https://www.eia.gov/todayinenergy/detail.php?id=32152. 23 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 Sept. 29, 2017) (noting the U.S. exported 31.6 million barrels of ethanol during this period); see also U.S. 

Energy Info. Admin., U.S. Fuel Ethanol Production Continues to Grow in 2017 (July 21, 2017), supra note 22. 24 U.S. Energy Info. Admin., U.S. Fuel Ethanol Production Continues to Grow in 2017 (July 21, 2017), supra note 

22.

25 See 2016 Ethanol Report, supra note 1, at 7. 26 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.

27 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 5, § 5.3. 28 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 
7

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 

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

market share to (1) the producer itself, and (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 the market shares based on marketing 

arrangements.

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, staff provided to EIA staff the information necessary to 

 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. 
8

allocate market shares.29 EIA staff separately allocated shares by producer and by marketer to 

calculate production-based HHIs.30

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.31 Production capacity provides a useful 

and easily confirmable indicator of a producer’s competitive significance.32 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

expansion.33 Incorporating capacity from such projects into current market share calculations is 

consistent with the approach set forth in the Horizontal Merger Guidelines.34

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 

 29 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.

30 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.

31 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. 32 See Horizontal Merger Guidelines, supra note 5, § 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. 33 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 began 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 

2017, 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. 34 See Horizontal Merger Guidelines, supra note 5, § 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.
9

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

Merger Guidelines.

35 This HHI is a slight decrease from the 2016 HHI of 482.36

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 

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.37

This approach yields an HHI of 699, unconcentrated under the Horizontal Merger 

Guidelines. This HHI is lower than the corresponding HHI of 737 in 2016.

38

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 

 35 Supra note 5. 36 See Figure 2. 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.

37 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. 38 2016 Ethanol Report, supra note 1, at 9. 
10

in operating their plants.39 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 

the concentrating 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 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 2016 through 

June 2017. Where EIA attributed the actual production market share directly to individual 

producers, the resulting HHI is 475, slightly greater than the 2016 HHI of 463.40 The 

production-based HHI calculated by attributing the market share of each producer to the firm that 

markets for that producer results in an HHI of 719, slightly lower than the 2016 HHI of 739.

41

 39 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.

40 2016 Ethanol Report, supra note 1, at 10 41 Id. at 11.
11

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 sugar cane-based ethanol from 

Brazil.

42 This responsiveness would likely restrain any potential exercise of market power by a 

domestic firm. Additionally, to the extent U.S. 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 (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 

 42 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, 

http://www.eia.gov/dnav/pet/pet_move_impcus_a2_nus_epooxe_im0_mbbl_a.htm. Though the United States is a 

net exporter of ethanol, demand exists for imported ethanol with low greenhouse gas emissions, such as sugar-canebased ethanol. See U.S. Energy Info. Admin., U.S. Ethanol Exports Exceed 800 Million Gallons for Second Year in

a Row, https://www.eia.gov/todayinenergy/detail.php?id=25312.
12

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.
13

Figure 2: Domestic Fuel Ethanol Concentration43

Concentration Based on Capacity 2016 HHI 2017 HHI

Shares attributed to each producer 482 480

Shares attributed to marketers for all marketing agreements 737 699

Concentration Based on Production 2016 HHI 2017 HHI

Shares attributed to each producer 463 475

Shares attributed to marketers for all marketing agreements 739 719

Note: Capacity for 2016 includes the capacity as of September 2016 and the capacity additions 

under construction and expected completions within 12 to 18 months after September 2016. 

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. 

Production data for 2016 are from July 2015 through June 2016; production data for 2017 are 

from July 2016 through June 2017.

 43 Supra note 5.
14

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

Figure 3: Historical Fuel Ethanol Capacity and HHIs

Capacity (Left Axis)

HHI (Right Axis)

Note: Annual figures are for operable capacity and capacity under construction at yearend for 1998 to 2004, and as of October for 2005 to 2017. (Capacity additions attributed 

to 2017 are expected to be completed by mid-2018.) The HHI figures shown are capacitybased, with market share attributed to the producer.