“It’s pretty hot in the kitchen, on the trade side,” says Craig Willis, senior vice president of global markets at Growth Energy. Willis offered solutions to “challenges on trade, supply chains, and global competitiveness” at the first AgTalks Virtual Town Hall.
“The opportunity for ethanol is huge,” says Willis. He notes robust blending programs in the United States and Brazil, who lead the world in ethanol production. He considers the rest of the world “low hanging fruit.”
“The rest of the world, collectively, is blending around a one-percent blend rate. If we could simply take the rest of the world from a one-percent blend rate to a 10-percent blend rate, that’s 20 billion gallons of ethanol potential,” Willis said.
Growth Energy continues to focus heavily on China, the world’s second largest gasoline market, as they look to increase the availability of ethanol.
“In 2017, they announced a policy to have E10, or 10-percent ethanol nationwide by 2020. They are not blending up to 10-percent yet, but are continuing to move forward in different provinces and large metro areas. If they go to E10 nationwide, that would be 3.5 billion gallons of new ethanol, double the size of our best ethanol export year,” Willis says.
Exporting additional ethanol to China is no small feat.
In 2018, China placed a 70-percent duty, or tax on U.S. ethanol. They have since reduced the tariff rate to 45-percent. However, Willis admits, “Forty-five-percent is too high” and United States exporters are not shipping product because “the arbitrage is not open.”
Growth Energy plans to resolve this issue by working alongside the Office of the U.S. Trade Representative (USTR) and U.S. Department of Agriculture (USDA).
Additional opportunities for U.S. ethanol lie in Brazil, the world’s third largest gasoline market. However, the commodity faces challenges there as well.
“They’re our largest ethanol export destination. Not only do we export there, they ship a lot to us. That’s where the rub is, and maybe more relative to this trade conversation. Back in 2017, they put a 20-percent duty on much of our ethanol. We don’t have parity there, so we’re bound to a one-point-nine-percent tariff on any product coming here because of WTO rules,” Willis said.