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Long-term demand challenges loom for ethanol

A leading ag economic group is expecting U.S. ethanol use to trend slightly lower in coming years.

The University of Missouri’s Food and Agricultural Policy Institute’s Ben Brown says there are growing threats to ethanol demand with the market incentivizing a shift toward electric vehicles as they become more affordable and fuel costs spike.

“Oil prices are high, electric vehicles are coming down in price because they’re just easier to make, right,” Brown said. “There’s not all these moving parts of an engine.”

And he tells Brownfield improving fuel efficiency of standard vehicles is driving down demand.

“Today, we’re seeing new cars being able to go anywhere between 40 and 50 miles per gallon, some a lot higher than that” he said. “Fifteen years ago, we were pretty happy with 20.”

He said fuel demand will also drop as more people work from home, cutting out their commute.

“Twenty [to] 30 years from now, we’re going to look back and we’re going to notice a very strong break,” he said. “Pre-pandemic – and post-pandemic in terms of the amount of fuel consumed in a year by people driving to and from work.”

Brown said there are two key positives for crop-based fuels, starting with aviation.

“Domestically, the excitement is, probably, going to shift away from ethanol into these other spaces like renewable diesel,” he said. “Which can be made from corn and corn byproducts. But it’s probably most likely going to be made from soybeans and canola oil here in the United States just because that’s the cheapest readily available source.”

Brown said FAPRI is expecting ethanol exports to increase moving forward. Brown made his comments on the recent Brownfield Weekly Commodity Market Update.