CoBank report looks at how recent challenges will force ethanol industry to transform its business model

June 18, 2020 |

In Colorado, excess production capacity and reduced demand will force the U.S. ethanol industry to transform its business model to create more value and improve its operational efficiency. Consolidation within the industry will lead to larger, more financially stable companies with diversified ethanol co-product offerings by 2025, according to a new report from CoBank’s Knowledge Exchange.

Strong export growth would help reduce the excess nameplate capacity, but current projections do not support such an outcome. Declining exports to Brazil and Canada caused last year’s 23% drop in net exports. Net ethanol exports are expected to drop by 21% in 2020 and then grow by 31% in 2021, based on analysis by The ProExporter Network. While favorable, the export growth rate in 2021 equates to only modest growth compared to 2019 and would be well below the peak of net exports in 2018.

Brazil has also emerged as a formidable export competitor that is claiming U.S. global ethanol market share. Brazil’s weak currency and access to cheap sugar have strengthened its position as an ethanol exporter.

While ethanol industry margins have been low in recent years, top-tier operators have continued to earn attractive margins and many middle-tier operators have produced positive margins over the past five years.

Category: Fuels

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