Are the US replacing Brazil on the worldwide ethanol market?

A new player in the game: 

Exacerbated by the “10% blend wall”, the US production overcapacity has forced 

ethanol producers to modify their specifications, logistics and sustainability 

provisions to compete with Brazil on the export markets. Since Q4 2009, US 

ethanol has been the main price driver of the EU ethanol market. This should 

continue during 2011 despite the RED certification requirements... as long as there 

is enough corn to produce it ! 

The US ascension to the role of the new World Ethanol Supplier was also helped 

by the slow disappearance of Brazilian ethanol. The exponential growth of the 

Brazilian domestic consumption has relegated exports to the 3rd division. In 

2006/07, Brazil exported 22% of its production compared to our prediction for 

2010/11 of only 6%. Strong ethanol consumption, strong sugar prices and 

potentially less sugarcane than initially expected may cause a repeat of the 09/10 

price spike.

November 2010 

Ethanol Report 

Ethanol prices base 100 in Jan. 2009

75

95

115

135

155

175

195

janv.-09

févr.-09

mars-09

avr.-09

mai-09

juin-09

juil.-09

août-09

sept.-09

oct.-09

nov.-09

déc.-09

janv.-10

févr.-10

mars-10

avr.-10

mai-10

juin-10

juil.-10

août-10

sept.-10

oct.-10

Europe

Brazil

US
2

1. WORLWIDE- Overview up to 2011 

Worldwide demand growing steadily 

0

20 000

40 000

60 000

80 000

100 000

120 000

2003 2004 2005 2006 2007 2008 2009 2010 2011

*1000 m3/year

EU US Brazil Others

31%

32%

30%

49%

17%

29%

9%

Increasing worldwide supply – but slower in 2011

0

20 000

40 000

60 000

80 000

100 000

120 000

2003 2004 2005 2006 2007 2008 2009 2010 2011

*1000 m3/year

EU US Brazil Others

36%

30%

28% 

mainly from 

Sugarcane

49%

mainly from 

Corn

16%

28%

7%

Ethanol report 

November 2010 

Growth rate 2003-2008 

= 16.5% per year

Growth rate 2008-2011

= 10% per year 

United States

Biggest consumer 

49 % of worldwide 

demand

Ethanol mixed with 

gasoline

Brazil

Ethanol mixed with 

gasoline but also used

alone instead of gasoline

Growth rate 2003-2008 

= 16% per year

Growth rate 2008-2011

= 8.3% per year

United States

replace Brazil as the

largest producer.

Mainly corn ethanol 

Brazil

Only sugarcane ethanol.

Mills able to produce both 

sugar and ethanol
3

2. USA: Bottleneck in the ethanol demand? 

The US consumption is reaching its cap (blend wall)

* 1000 bbl/day

E10 Max 

Consumption

E15 Max 

Consumption

0

200

400

600

800

1000

1200

1400

1600

oct-07

janv-08

avr-08

juil-08

oct-08

janv-09

avr-09

juil-09

oct-09

janv-10

avr-10

juil-10

oct-10

janv-11

avr-11

juil-11

oct-11

445 K Barrel per 

Day Consumption

US ethanol production overcapacity

400

500

600

700

800

900

1 000

oct.-07

janv.-08

avr.-08

juil.-08

oct.-08

janv.-09

avr.-09

juil.-09

oct.-09

janv.-10

avr.-10

juil.-10

oct.-10

janv.-11

avr.-11

juil.-11

oct.-11

*1000 bbl/day

US ethanol production capacity US ethanol demand

E10: 10% ethanol in 

gasoline blending

= 12.6 bln gallon

= 47.6 mln m3 per year

(max allowed)

Today, ethanol demand is 

reaching the blend wall

From E10 to E15:

+50% of potential 

demand 

= 6.8 bln gallon

= 25.8 mln m3 per year

E15 allowance: not yet 

generalized and many 

legal and logistic issues 

to solve

More than 95% ethanol 

made from corn

In 2010, US ethanol 

production capacity

= 13.6 bln gallon 

= 51.5 mln m3 per year

8% more than

domestic ethanol

demand 

Overcapacity

= Surplus

 = Low production 

margins

Ethanol report 

November 2010 
4

US ethanol prices highly correlated with US corn

CBOT Corn Future 

(Left)

CBOT Ethanol Swap 

(Right)

250

350

450

550

650

750

850

juil.-07

sept.-07

nov.-07

janv.-08

mars-08

mai-08

juil.-08

sept.-08

nov.-08

janv.-09

mars-09

mai-09

juil.-09

sept.-09

nov.-09

janv.-10

mars-10

mai-10

juil.-10

sept.-10

cts/bu

1,20

1,40

1,60

1,80

2,00

2,20

2,40

2,60

2,80

3,00

3,20

$/gal

US corn supply and demand

250

275

300

325

350

2005/06 2006/07 2007/08 2008/09 2009/10 2010/11

mln bu

0%

5%

10%

15%

20% Stock-to-use (%) US corn supply US corn demand

Minimum stock level

US biofuels mandates (the Renewable Fuel Standard)

0

30

60

90

120

150

2006 2008 2010 2012 2014 2016 2018 2020 2022

* mln m3/year

Other biofuels (corn ethanol) Other advanced biofuels

Biodiesel Cellulosic

90% correlation between 

US ethanol & US corn

prices

During H1 2010, ethanol 

prices at historically low

levels but prices are

currently rising because 

of the tight situation of 

corn

In 10/11, estimated corn 

consumption higher than 

corn crop

Strong decrease of US 

corn stocks is expected

Supporting high corn 

prices

Ethanol report 

November 2010 

RFS: Ethanol demand 

+15% per year

Corn ethanol demand 

stabilizes after 2015

= 15 bln gallon 

= 57 mln m3 per year

Potential market for

other advanced 

biofuels

Other advanced biofuels

include sugarcane 

ethanol from Brazil

but not corn ethanol

California also has its

own regulation (LCFS),

promoting advanced 

biofuels
5

Changes in RFS advanced biofuels mandates

2010 Advanced 

Biofuels Mandates - 

0.95 BGY

2011 Advanced 

Biofuels Mandates 

1.35 BGY

3. BRAZIL – Supply not enough for demand? 

Share of Flexible Fuel Vehicles in sales of new cars

0%

20%

40%

60%

80%

100%

2002 2004 2006 2008 2010 2012 2014

Gasoline Cars Market Share

FFV Cars Market Share

Diesel Cars Market Share 

Production of cellulosic 

ethanol not ready yet

Reduction of cellulosic 

ethanol mandate =

increase of other

advanced biofuels

mandate

Additional potential for

imports of sugarcane 

ethanol

Financial crisis had a 

limited impact on 

Brazilian car sales

Flex Fuel Vehicles can 

replace gasoline by fuel 

ethanol (hydrous)

90% new cars sold 

= Flex Fuel Vehicles

FFV in total Brazilian 

cars fleet

= 10% in 2005

 = 33% in 2009

 = 70% in 2014

Ethanol report 

November 2010 
6

Potential of the Brazilian ethanol demand

*1000 m3/month

0

2 000

4 000

6 000

8 000

10 000

2002

20032004

2005

2006

20072008

2009

2010

2011

2012

2013

2014

2015

2016

2017

20182019

2020

Hydrous

Anhydrous

(assuming all FFV using only ethanol – not gasoline)

Flexible consumption responding to 2009/2010 prices levels

800

1 000

1 200

1 400

1 600

1 800

2 000

2 200

2 400

août-09

sept.-09

oct.-09

nov.-09

déc.-09

janv.-10

févr.-10

mars-10

avr.-10mai-10

juin-10

juil.-10

août-10

*1000 m3/month

hydrous ethanol, 

Esalq R$/m3

1500

1600

1700

1800

1900

2000

2100

Ethanol consumption (left axe)

Gasoline consumer price (ethanol equiv., right axe)

Ethanol consumer price (right axe)

Increase of FFV cars

= huge increase of the 

maximum demand of 

fuel ethanol (hydrous)

Slow decrease of the 

ethanol blended into

gasoline (anhydrous) 

Sugarcane ethanol 

production takes place

between April and Nov

From January 2010 

To May 2010

Gasoline cheaper than 

fuel ethanol: collapse of 

the ethanol consumption

After May 2010

Ethanol price 

cheap again: rebound of 

the ethanol consumption 

Ethanol report 

November 2010 
7

High prices levels with low stocks in 2009/2010

0

1000

2000

3000

4000

5000

6000

7000

8000

avr-09

mai-09

juin-09

juil-09

août-09sept-09

oct-09

nov-09

déc-09

janv-10

févr-10

mars-10

*1000 m3

0

200

400

600

800

1000

1200

1400

hydrous ethanol, 

Esalq R$/m3

5-year average stocks (left axe)

2009/2010 stocks (left axe)

5-year average prices (right axe)

2009/2010 prices (right axe)

Prices & Stocks Forecasts for 2010/2011

Historically high prices

are explained by

low stock levels

~ 2 mln m3 lower than

average in Dec. 2009

Prices jumped sharply

to cut consumption

down by 25% during 6 

months

Ethanol report 

November 2010 

2010/2011 forecasts

assuming steady ethanol 

prices: stocks would be 

very low in March 10/11

Need to reduce again 

the demand?

Repeat of 2009 

situation?

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

avr-10

mai-10

juin-10

juil-10

août-10sept-10

oct-10

nov-10

déc-10

janv-11

févr-11

mars-11

*1000 m3

0

200

400

600

800

1000

1200

1400

hydrous ethanol, 

Esalq R$/m3

2010/2011 stocks (left axe)

2010/2011 prices (right axe)

Scenario: 1000 R$/m3

?
8

4. EUROPE-27 – No major changes 

EU ethanol supply & demand Up to 2015

0

2

4

6

8

10

12

14

2007 2008 2009 2010 2011 2012 2013 2014 2015

*mln m3

Production Consumption Deficit

Fuel ethanol production per country in the EU

* mln m3

0

1

2

3

4

5

6

2004 2005 2006 2007 2008 2009 2010 2011

Others (12%)

Czech republic ( 4% )

Sweden ( 4% )

Poland ( 5% )

Belgium ( 7% )

Netherlands ( 8% )

Spain ( 8% )

UK ( 12% )

Germany ( 17% )

France ( 23% )

Ethanol report 

November 2010 

Increasing supply & 

demand thanks to 

biofuels policies in EU 

member states

Structural deficit in EU. 

Increasing along with 

demand 

Structural deficit of 

non-fuel ethanol: 

~ 0.5 mln m3/year

Production in 2011 

is 11 times larger than 

in 2004

Diversified ethanol

feedstock: beet, wheat 

and corn

France, Germany and 

UK = more than 50% of 

EU production
9

Localization of surplus/deficit of fuel ethanol

DEFICIT

SURPLUS

BALANCED

No prod./demand

Different import tariffs for fuel ethanol in the EU

Low duty 

102€/m3

High duty 

192€/m3

No imports, quotas for local 

producers

Low and high 

duties

Ethanol report 

November 2010 

Surplus 

= France, Belgium

& Eastern Europe

Deficit 

= Northern Europe 

& Med. Area

Surplus/Deficit not

linked with feedstock 

availability

Northern Europe:

Feedstock available but 

still in deficit. 

Spain:

Opposite

Fuel ethanol 

import tariffs: 

different among 

member states

Fuel ethanol imports: 

mainly in countries

with low import tariffs 

Most countries with 

high import tariffs are 

ethanol exporters 

(within EU)

Fuel ethanol policies 

are not standardized 

in the EU
10

5. WORLDWIDE ETHANOL TRADE FLOWS – 

Major changes happened 

 

Comparison of US prices & Brazilian prices

300

400

500

600

700

800

juil.-07

sept.-07

nov.-07

janv.-08

mars-08

mai-08

juil.-08

sept.-08

nov.-08

janv.-09

mars-09

mai-09

juil.-09

sept.-09

nov.-09

janv.-10

mars-10

mai-10

juil.-10

sept.-10

$/m3

Brazilian Ethanol

US Ethanol

US Ethanol is more competitive 

than Brazilian Ethanol

Trades flows in 2009 & 2010

Brazil 3400 EU 1400

Central America* 1000 USA 900

USA 450 Central America* 800

Pakistan 200 Japan/Korea 700

South-Africa 200 India 500

China 100 Canada 300

Ukraine 100 West Afr. / Nig. 200

Others 250 Others 900

TOTAL 5700 TOTAL 5700

*Central America includes re-export to US

Brazil 1580 Japan/Korea* 1090

USA 1080 EU 800

Central America 200 India 350

Pakistan 200 Philippine 215

South-Africa 200 West Afr. / Nig.* 200

China 150 Canada 200

Ukraine 100 Others 905

Others 250

TOTAL 3760 TOTAL 3760

*Including ETBE imports

Major Exporters Major Importers

2009 Trade Flow Data (*1000 m3)

Major Exporters Major Importers

2010 Trade Flow Data (*1000 m3)

Ethanol report 

November 2010 

Pre-Sep. 2009

Brazilian sugarcane 

ethanol is the cheapest 

in the world 

Post-Sep. 2009

US corn ethanol is 

cheaper than Brazilian

sugarcane ethanol

And much cheaper!

2009

Brazil: largest exporter

~60% World Market

US: import 0.9 mln m3 

from Brazil

2010

World market shared 

between Brazil & US

Brazil: exports down,

(by more than 50%)

40% of world market

US: end of imports

& exports up

~30% of world market
11

World trades flows map 2009 & 2010

MAJOR TRADE FLOWS IN 2009 ~ 5,7 Millions m3 / Year

Fuel Industrial & 

Beverage

Fuel & 

Industrial

The statistics charts and any other information given in this market review are collected from 

sources believed to be reliable. However the SUCRES & DENREES Group is not liable for 

ensuring the accuracy, completeness or timeless of the information which is provided as general 

information and for your reference only and should not be relied upon or used as the sole basis 

for making significant decisions without consulting primary or more accurate, more 

comprehensive sources of information. Any reliance upon the information will be at your own 

risk. The analyses and opinions expressed by the SUCRES & DENREES Group and formed out of 

the Information constitute its own current views and opinions but do not necessarily state or 

reflect those of others. Thus, the SUCRES & DENREES Group accepts no liability whatsoever 

with regard to these views and opinions, which are personal to the SUCRES & DENREES Group.

Consequently, SUCRES & DENREES Group does not accept any liability for any loss or damage 

which may arise directly or indirectly from your use of or reliance upon the Information or upon 

the views and opinions of the SUCRES & DENREES Group. 

Ethanol report 

November 2010 

2009

US: Imports 0.9 mln m3 

from Brazil

EU and Asia: 

Structural deficit of ethanol 

>> Need to import

2010

US: From net importer 

to net exporter

Brazil: less dominating the 

world market

EU and Asia: 

Still importing, arbitrage 

between US & Brazilian

prices

Global trades flows 

down from 5.7 to 3.7 mln 

m3/year

MAJOR TRADE FLOWS IN 2010 ~ 3.7 Millions m3 / Year

Industrial & 

Beverage

Fuel & 

Industrial
12

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