Nebraska, Iowa ethanol producers hail opening of Japan’s market, expect sales to top last year’s

Source: By Russell Hubbard, Omaha World Herald • Posted: Thursday, December 21, 2017

U.S. exports of ethanol — Iowa and Nebraska are the top two producers — are slated to top last year’s levels, and a new customer is opening up in Asia after a Cornhusker State trade mission.

Ethanol exporters in the United States have sold 1 billion gallons of the corn-based motor fuel overseas through September, the last period for which figures are available from the U.S. Energy Information Administration.

That means producers will have had three months to sell about 50 million more gallons and beat last year’s tally of just over a billion gallons, the most since 2011’s 1.2 billion gallons.

And it might get better. Japan late this year decided to begin importing U.S. ethanol, which is 35 percent cheaper than the sugarcane-based Brazilian ethanol the country has been relying upon as an oxygen booster for clear gasoline and additive to the motor-fuel supply environmental advocates say burns cleaner than clear gas.

The opening up of the world’s third-largest economy to U.S. ethanol follows a late-summer trade mission to Japan by Nebraska Gov. Pete Ricketts, who was accompanied by officials with state ethanol producers.

“During the trade mission, I met with policymakers to urge the opening of Japan to American products and commodities as well as the reduction of tariffs on our goods,” Ricketts told The World-Herald Wednesday. “The opening of Japan to American ethanol would be mutually beneficial by creating more opportunity for Nebraska’s ethanol producers and connecting Japanese consumers to our quality ethanol products.”

Japan is expected to use about 132 million gallons of ethanol in 2017, most coming from Brazil. But the Brazilian sugar cane crop has recently been plagued by poor harvest conditions, making it more expensive than corn-based ethanol.

And that is the stuff Nebraska and Iowa specialize in. Iowa is No. 1 in both corn production and ethanol, with more than three dozen plants. Nebraska usually ranks in the top four in corn, and is second in ethanol, with about two dozen plants.

The ethanol business has a $5 billion annual impact in Nebraska, according to a University of Nebraska-Lincoln analysis.

“Our competitively priced ethanol makes our product desired on the global market,” said Jan tenBensel, vice chairman of the Nebraska Ethanol Board. “Nebraska has a strategic location because we are centrally located with rail access to major ports in Los Angeles and Houston/Galveston. This allows for perfect export market conditions and geographical competitiveness.”

Of course, not everyone is leading pep rallies for ethanol. Poultry feeders say it artificially raises the price of corn feed, small motor aficionados say it is bad for valves and seals and some motorists say ethanol-added gas is cheaper only because it gets worse gas mileage.

The industry got its big boost 10 years ago when President George Bush signed a bipartisan federal law that boosted the amount of ethanol to be blended into gas tanks from the original 2005 renewable fuels legislation. That has led to the ubiquitous 10 percent blend called E10. However, to fit much more than the 15 billion or so gallons now required by the law, people will either have to drive more or accept higher blends such as E15 and greater.

“I have every confidence that in 10 years from now our market share will grow from 10 percent of gasoline demand today to between 20 and 30 percent of the market, based on vehicle emission standards and demand for low-carbon fuel as the U.S. comes to grips with the fact that we need to do more to reduce CO2 emissions,” said American Coalition for Ethanol Chief Executive Brian Jennings. “The lowest-cost way to reduce CO2 from vehicles is through low-carbon, high-octane fuels like ethanol,” he said of carbon dioxide.

Not so fast, said the American Petroleum Institute, an oil and natural gas trade group, when the 2018 renewable fuel blending requirement last month was confirmed at 15 billion gallons. API says that most cars aren’t built to run on E15 and that automakers such as Volvo, Mazda and BMW have 2018 models that are not compatible with E15.

But for now, it’s full-speed ahead to Japan. Omaha-based Green Plains, the second-largest ethanol producer with 17 U.S. plants, figures that Japan will begin importing about 250 million U.S. gallons initially and grow from there as the country increases ethanol usage in an attempt to reduce greenhouse gases by 50 percent in coming years.

“As far as Green Plains, we will certainly work to add it to our list of opportunities and believe that our addition of a Gulf Coast export terminal, which went operational at the start of December, gives us some competitive advantage to Japan and other export markets,” spokesman Jim Stark said.