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Mexico's Fuel Retailers Want To Buy U.S. Ethanol, Iowa Tour Group Says
URBANDALE, IA--A group of nine Mexican fuel retailers spent four days touring ethanol sales outlets in Iowa to learn how the renewable fuel is marketed to motorists in the number one ethanol-producing state.
The tour, which ended Thursday (July 11) with a stop at a newly-opened Casey’s convenience store here, was co-sponsored by the Iowa Renewable Fuels Association (IRFA), the American Coalition for Ethanol (ACE) and the U.S. Grains Council. All three of the organizations shared the tour’s expenses, according to Lucy Norton, managing director of the Iowa Renewable Fuels Association.
The Iowa tour was scheduled so Mexican fuel retailers can learn how the U.S. ethanol industry works and how ethanol blended gasoline has been successfully implemented across Iowa, Norton stated. The tour included stops in Des Moines, Melbourne, Waterloo, Nevada and Urbandale.
In 2017, Mexico changed its law to allow the dispensing of blends of up 10% ethanol with 90% gasoline (E10). The Mexican ethanol market is now beginning to open up in a significant way for Iowa ethanol producers.
With domestic demand for ethanol relatively flat and ethanol supplies abundant, U.S, ethanol producers are staking much of their prospects for growth and profits on the export market.
U.S. Ethanol Exports
The U.S. Department of Agriculture’s Foreign Agricultural Service reported on July 3 that approximately 99.61 million gallons of ethanol were exported by U.S. ethanol producers in May, which is an increase of almost 8.5 million gallons, or 9% more than in May 2018, but down 34% from April this year when 150.17 million gallons of ethanol were exported.
During May, the U.S. exported ethanol to more than three dozen countries, according to the USDA. Canada was the number one destination for U.S. ethanol with 23.08 million gallons. India (14.39 million gallons), Brazil (10.31 million gallons), the Philippines (9.12 million gallons), and South Korea (9.03 million gallons) were the second, third, fourth, and fifth export destinations, respectively, for U.S. ethanol.
The value of the U.S. ethanol exported in May totaled $165.24 million, which is $13.5 million, or 9%, more than the $151.78 million recorded in May 2018, but down 31% from the $240.74 million in ethanol exports reported in April.
During the first five months of 2019, U.S. ethanol exports totaled 631.51 million gallons at a value of $1.02 billion, down from 781.21 million gallons at a value of $1.27 billion during the same period of 2018.
Thursday’s (July 11) visit to the new Casey’s convenience store showcased the company’s efforts to promote the sale of higher blends of ethanol. The new Casey’s is located near a recently-opened exit off Interstate 35-80 north of Des Moines, IA.
Mexico Is Interested
The Mexican visitors saw that per-gallon fuel prices for the higher ethanol blends were lower at the Casey’s pumps, where E85 sold for $2.25.9 a gallon, unleaded 88 (E15) sold for $2.60.9, and super unleaded (E10) went for $2.65.9 a gallon. That compared to unleaded without ethanol (87 octane) for $3.00.9, and premium gasoline without ethanol (91 octane) for $3.20.9.
Nathaniel Doddridge, director of fuel at Casey’s headquarters in nearby Ankeny, IA, demonstrated to the Mexican fuel retailers and buyers team how the flexible fuel pumps work at the new location. “We always lead with the lowest price fuel (E85) on the left and the highest price fuel (premium unleaded) on the right,” Doddridge said. He also noted that the price spread between high level blends of ethanol and unblended gasoline is about the same at all of Casey’s 2,150 convenience stores.
Doddridge said that Casey’s is equipping each one of the 60 new stores it is opening this year with pumps that can dispense higher blends of ethanol such as E85 and E15. And, it is retrofitting 70 existing stores this year with the dispensing equipment for higher ethanol blends.
“Casey’s wants to make a positive statement for the farmers of this state and the country,” he said, by increasing the demand for corn-based ethanol.
In June, after the Environmental Protection Agency approved the year-round sale of E15, Casey’s sold a total of one million gallons of E15, according to Doddridge. “We are optimistic that as our customers use it more and more, they will buy more and more of it,” he noted. “It’s at least five- cents-a-gallon cheaper so that’s a no-brainer.”
Ron Lamberty, senior vice president for the American Coalition for Ethanol in Sioux Falls, SD, accompanied the group on their four-day tour of ethanol retailers. Lamberty directs ACE's market development efforts, working with petroleum marketers to facilitate the use of ethanol nationwide.
He has given 11 workshops in Mexico to educate fuel retailers there on ethanol sales and how to conduct ethanol market development efforts.
Bringing the Mexican retailers to the U.S. gives them a chance to learn what U.S. fuel retailers are doing to make ethanol blended gasoline available to their customers, Lamberty stated. “Seeing is believing,” he said as he watched the Mexican group gather around one of the flex fuel pumps at the Casey’s. “By bringing them here, we are shortening the learning curve about selling ethanol by months. You can talk about it all you want, but there’s nothing like seeing it.”
By visiting ethanol retailers in the U.S., the Mexican visitors can see that the pumps used by U.S. fuel retailers are compatible with ethanol blends and they can talk to the people who are filling their cars with it, Lamberty said.
Mexican fuel stations use the same pumps that Casey’s and other fuel retailers do in the U.S., so they can see that their pumps and storage tanks will be compatible with dispensing ethanol.
Lamberty said the group also has asked about how they can get U.S. ethanol shipped to Mexico. Mexican law forbids using Mexican-grown corn to make ethanol.
Heidi Bringenberg, assistant director for the U.S. Grains Council in Mexico, also accompanied the group in Iowa.
“This is a first-of-its-kind tour to bring Mexican fuel retailers to Iowa,” she said. “The Mexican market represents a potential 1.2 billion-gallon market for U.S. ethanol.”
Norton said that producing that amount of ethanol would require approximately 428.6 million bushels of corn.
A Big Mexico Ethanol Market
Stephen Wittig, a consultant for the U.S. Grains Council in Mexico, said that the size of the Mexican ethanol market could possibly equal the amount of ethanol consumed in each of the states of Texas, California, or Florida.
“It could be that big,” he stated.
Wittig estimated that the Mexican fuel retailers on the tour sold a total of 40 million gallons of gasoline a month.
The Mexican fuel retailers told Successful Farming that they are anxious to get on the ethanol bandwagon and start selling the renewable fuel.
Jose Rocha, a director of the Circle K convenience stores in Mexico, said he has learned on the tour that the cost of ethanol blends is lower than straight gasoline, which gives ethanol a cost-competitive advantage. “In Mexico, cost is very important,” Rocha said. Although ethanol blends won’t be sold in Mexico for another year, he added, “We want to be ready when the time comes, so we need to know how to access ethanol from the U.S.”
Another tour participant, Gerardo Cantu, is a director of Petrorack, which supplies diesel and gasoline to the entire country of Mexico and which operates Wal-Mart gas stations there.
Cantu said he wants to learn how the U.S. ethanol industry introduced the renewable fuel in the Eighties. “We are trying to bring ethanol to Mexico and learn from you the experiences you had when you started to develop your ethanol market,” he stated.
PEMEX, the national oil company of Mexico that controls 95% of the Mexican fuel market, is very much opposed to ethanol, he said, and will fight to keep it from succeeding in the marketplace.
“They hate ethanol,” Cantu said of PEMEX officials who oppose the use of the renewable fuel made from corn. “But we don’t care. We are going to do what is better for our customers because ethanol is cheaper, cleaner and better” than petroleum–based fuels.