Brazilian ethanol producers may look to China if any Sino-U.S. trade war takes place and sets in for some time. One reason is that the Chinese government is aiming for a 10% ethanol blend by 2020, and has suspended U.S. ethanol imports. The Chinese would likely look to Brazil to help fill any gap, though Brazil has faced its own ethanol shortfalls in recent years, and even felt the need to slap a 20% tariff on imported U.S. ethanol to protect its own industry.
“In the short term, there’s no benefit (to Brazil, in terms of ethanol in such a trade war)” one Brazilian expert told Agencia Estado, a news service. The country needs 7.4 billion or so gallons of ethanol annually, and has been importing so much from the U.S. in recent years that producers managed to get a tariff put on the imported U.S. product to help protect the sugarcane industry. Brazil’s ethanol is nearly all made from cane, with just a handful of corn ethanol plants up in Mato Grosso to help mop up the excess second-crop corn they’ve grown used to building up each year.
Last year, the U.S. reportedly shipped about 24.6 million gallons of ethanol to China, with a lot more likely headed that way to get eventually to the mandated blend level. And last year’s number was down from 2016, when the Asian giant was America’s number-two market for the alternative fuel.
But it would be tough for Brazil to meet China’s needs. After all, the South American country is already a major importer from the U.S. despite the tariff - in fourth place in 2016, which was before Brazil’s tariff, according to the Department of Commerce. This year’s sugarcane crop isn’t predicted to be more than a couple of percent greater than that of last year. And China will eventually need up to an estimated 5.3 billion gallons of ethanol to meet the blend requirement. They produce some corn ethanol on their own, of course, and, in the near term could be expected to ramp up production that way. But then they’d still need corn for livestock feed.
One way around it is the same way I’ve heard Chinese crushers may get around any potential soybean tariffs: Let Brazil buy the product from the U.S., call it “Brazilian,” and bring in the tankers.
The opinions of the author are not necessarily those of Farm Futures or Farm Progress.