Ethanol industry disappointed with Brazil negotiations plan

Source: By The Hagstrom Report • Posted: Wednesday, September 16, 2020

An agreement between the United States and Brazil to negotiate on market access for ethanol and sugar for 90 days that began Monday means that U.S. ethanol producers can export to Brazil without encountering tariffs during that period. But the agreement doesn’t have much meaning because it comes during a period when U.S. exports to Brazil are relatively low, according to a joint industry statement.

After expiring on August 31 and a 20% tariff temporarily applied to all U.S. ethanol, Brazil’s tariff rate quota (TRQ) has been extended for a further 90 days, as of Monday.

Growth Energy CEO Emily Skor, U.S. Grains Council President and CEO Ryan LeGrand, National Corn Growers Association CEO Jon Doggett and Renewable Fuels Associations President and CEO Geoff Cooper issued a joint statement:

“The U.S. Grains Council, Growth Energy, the Renewable Fuels Association and the National Corn Growers Association believe the 90-day extension of the TRQ serves neither Brazil’s consumers nor the Brazilian government’s own decarbonization goals, especially while Brazil’s ethanol producers continue to be afforded virtually tariff-free access to the U.S. market.”

“The extension falls during Brazil’s annual inter-harvest period when U.S. ethanol exports to Brazil are traditionally low, causing greater uncertainty for U.S. exporters looking to make selling decisions now for the traditionally higher Brazilian demand in the winter months.

“While the Brazilian ethanol market has not been fully reopened to imports, we appreciate the continued support and efforts of the U.S. government as we use this 90-day period to aggressively pursue an open and mutually beneficial ethanol trading relationship with Brazil.

“The U.S. ethanol industry actively sought, through repeated dialogue with local industry and government, to illustrate the negative impacts of tariffs on Brazilian consumers and the Brazilian government’s own decarbonization goals. However, it seems Brazil’s government has left its own consumers to pay the price through higher fuel costs once again.

“While we would have preferred Brazil abandon its ethanol import tariffs entirely and resume its free trade posture on ethanol, which it held for several years before the TRQ, we view its decision to temporarily extend the TRQ on ethanol at the current level as an opportunity to continue discussions toward that end.

“The U.S. ethanol industry remains focused on expanding the global use of low-carbon ethanol, reducing barriers to trade and elevating its prominence in energy discussions. We remain eager to collaborate and cooperate with other nations that share in the vision of a free and open global ethanol market.”

American Coalition for Ethanol CEO Brian Jennings added, “While an extension is better than the flat 20% tariff on all U.S. exports, this merely kicks the can down the road past the election and can be added to the list of piling uncertainties facing our industry. We have been trying to restore demand at home and around the world and in a year like 2020, finding growth opportunities are of the utmost importance.

“Prior to the imposition of the TRQ, Brazil was the largest export destination for U.S. ethanol producers,” Jennings said.

“Our countries maintained a reciprocal policy of applying minimum or zero duties on ethanol imports for nearly a decade and we hope Brazil will put an end to its protectionist trade policies toward our U.S. ethanol industry. The TRQ unnecessarily limits our export potential and we hope further negotiations will ultimately make it easier for producers to pursue free and fair trade for ethanol in the future.”

–The Hagstrom Report

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