U.S. state and federal policies may lead to the United States importing more Brazilian sugarcane-based ethanol while the United States increases its corn-based ethanol exports to Brazil, the U.S. Energy Information Administration (EIA) reported this week. The U.S. renewable fuels mandate classifies sugarcane ethanol as an advanced biofuel.  With production of cellulosic ethanol, another form of advanced biofuels, unlikely to meet the federal targets in the near future, Brazilian ethanol could fill that gap, the EIA said.  “In this context, it is not hard to envision a scenario in which the United States continues to export corn-based ethanol to Brazil while at the same time importing sugarcane ethanol from Brazil to comply with California emission standards and Federal RFS requirements,” the EIA explained.

Another factor affecting U.S. ethanol trade will be the ability of the domestic market to consume higher blends of ethanol in gasoline.  While the Environmental Protection Agency has increased the maximum blend rate in gasoline to 15 percent from 10 percent in vehicles built after 2000, logistical and legal hurdles have prevented widespread sales.  The sale of E85, a blend with 85 percent ethanol and 15 percent gasoline, has also lagged due to a limited number of flex-fuel vehicles and a limited availability of E85 fueling pumps.  If these blends are able to overcome these hurdles, E15 will “likely be a more economically attractive market to domestic ethanol producers,” the EIA added.

With relatively few cumbersome import and tax restrictions and high sugar prices, the United States should be able to overtake Brazil in ethanol exports during the second half of 2011.  During the first five months of 2011 U.S. ethanol exports more than doubled from the same period last year, the EIA noted.  “For the remainder of 2011, it is likely that the United States will surpass Brazil as the world’s largest ethanol exporter due to recent supply shortages and resulting high sugar prices in Brazil,” the EIA said in its weekly petroleum report.  U.S. producers have also benefited from Brazil eliminating its 20 percent import duty through 2011 and lower European tariffs on ethanol blended with gasoline.