Drought to Impact Ethanol Exports

By CnAgri2012-08-09 19:17:45 Print

Exports of corn-based ethanol may suffer from the country's worst drought in more than 50 years, but prices for gasoline blended with the domestic fuel should not rise significantly, the government said on Wednesday. The drought has shriveled crops and boosted prices for corn to record levels late last month. The higher corn prices have also boosted prices for ethanol and helped push some distilleries to close until market conditions improve, according to Reuters.

The Energy Department's statistics wing, the Energy Information Administration, forecasted this week that U.S. ethanol output should fall by 70,000 barrels per day to 830,000 bpd for the second half of the year.

But gasoline prices should be spared despite the loss of ethanol output, the EIA said on Wednesday. "The impact of the forecasted decline in domestic ethanol production should be primarily reflected in reduced ethanol exports," the EIA said.

The United States transitioned from being a net importer of ethanol to a net exporter in 2010 and in 2011 it was the world's top producer of ethanol, ahead of Brazil. The EIA did not indicate how much imports should fall.

Flexibilities in the U.S. mandate for blending increasing volumes of ethanol into gasoline should help control gasoline prices, the EIA said.

The mandate allows fuel blenders to draw down stockpiles of ethanol and to apply banked credits representing produced ethanol known as Renewable Identification Numbers, or RINs, to achieve minimum blending levels.