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Ethanol exporters seek port

01/28/2014 @ 8:26am

U.S. ethanol makers are banking on export markets as they grapple with Obama administration plans to cut U.S. consumption requirements, but the industry is hampered by a distribution structure built almost exclusively around the domestic market.
Archer Daniels Midland Co., Green Plains Renewable Energy Inc. and other ethanol producers are trying to boost sales to Brazil, Mexico, Asia and the Middle East, in part by cutting costs to make the corn-based biofuel more price-competitive overseas.
Exports could reach one billion gallons this year, increasing their share of U.S. output to 7% from 5%, as lower corn prices help producers sell ethanol more cheaply to foreign buyers, according to the Renewable Fuels Association, a trade group. But the $44 billion industry's efforts to further expand exports could be limited, analysts say, because the bulk of U.S. ethanol plants are located in the Midwest to be close to the corn supply rather than near shipping ports, driving up costs to transport the fuel.
The export ramp-up comes as the Environmental Protection Agency weighs final approval of a proposal that would for the first time cut the annual requirement for ethanol in gasoline in the U.S. The EPA, which proposed the change in November, is expected to make a final decision this spring after a public-comment period that ended Tuesday.
The ethanol industry and farm-state supporters are lobbying the White House to reverse its proposal, which would mark one of the sector's biggest setbacks to date. The plan would require about 13 billion gallons of corn ethanol in the nation's fuel mix this year, lower than the 14.4 billion originally intended under a 2007 law. In explaining its move, the EPA said the levels mandated in the law are difficult to meet because of a lack of demand for gasoline blends containing more than 10% ethanol and sluggish U.S. gasoline consumption overall.
Export markets offer a potential lifeline as more countries enact policies to reduce dependence on conventional oil, industry executives say. They cite, for example, the Philippines, where a policy encouraging greater use of renewable fuel led to an eightfold increase in imports of U.S. ethanol in the first 10 months of 2013 from a year earlier, according to the RFA.
In November, U.S. ethanol exports reached the highest monthly level since March 2012, helped by increased shipments to Canada, China, India and Mexico, the RFA said. Despite recent gains, exports for all of 2013 were expected to drop from a year earlier, the second straight decrease.
Many ethanol companies declined to discuss their export strategies, citing competitive factors. But executives have voiced optimism in interviews and earnings calls that exports can help the industry offset weak growth at home.

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