1.
Ethanol and grain
markets: issues
and uncertainties
Pat Westhoff (westhoffp@missouri.edu),
Jarrett Whistance (whistancejl@missouri.edu) and
Wyatt Thompson (thompsonw@missouri.edu)
IFPRI/AMIS Policy Seminar, “Food vs. Fuel V2.0”
January 24, 2023

2.
Ethanol production is dominated by a few
major players
• U.S. is largest producer
• Corn dominant feedstock
• Little growth in recent years
• Brazil #2
• Sugarcane main feedstock
• U.S. + Brazil: 74% of world
production in 2021
• China #3; EU #4
• Mix of feedstocks
2
U.S. 48%
Brazil 26%
China 9%
EU 5% Other
12%
2021 ethanol production
U.S. Brazil China EU Other
Source: Foreign Agricultural Service, USDA, December 2022.

3.
How important is ethanol in explaining
developments in global agricultural markets?
Really important
• USDA says 38% of 2022 U.S. corn
crop will be used to make ethanol
and coproducts
• Plus, need to consider use of
sugarcane in Brazil and various
feedstocks in other countries
• Keeps prices higher than they
would otherwise be
• Plus, if policy makes ethanol
demand inelastic, may exacerbate
price swings
3

4.
How important is ethanol in explaining
developments in global agricultural markets?
Really important
• USDA says 38% of 2022 U.S. corn
crop will be used to make ethanol
and coproducts
• Plus, need to consider use of
sugarcane in Brazil and various
feedstocks in other countries
• Keeps prices higher than they
would otherwise be
• Plus, if policy makes ethanol
demand inelastic, may exacerbate
price swings
Not so important
• Correcting for coproducts, U.S. use
is just 8% of global corn use and
about 3% of global grain use
• For comparison, the increase in
China’s feed use of corn since 2000
is >10% of global corn use
• U.S. ethanol use of grain hasn’t
changed much in last 10 years,
probably won’t for next 10 years
• Thus, it’s hard to blame ethanol for
recent price developments
4

5.
Critical role of U.S. Renewable Fuel Standard
• In recent years, U.S. biofuel use
roughly matches the applied
Renewable Fuel Standard (RFS)
• Statutes, EPA rules, small-refinery
waivers, fuel use and court cases can all
affect the applied RFS for a given year
• Suggests applied RFS largely
determines overall biofuel use
• Mix of ethanol/biodiesel/other biofuels
can change with market circumstances,
other policies
• But total use only deviates slightly from
applied RFS
• Rules allow some smoothing across years
5
0
5
10
15
20
25
2015 2016 2017 2018 2019 2020 2021 2022
Billion
ethanol-equiv.
gallons
Applied RFS and compliance
Biomass-based diesel Other advanced
All other Applied RFS
Source: FAPRI November 2022 preliminary baseline

6.
One piece of evidence that the RFS has been
binding in most recent years
6
Source: FAPRI November 2022 preliminary baseline
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
2015 2016 2017 2018 2019 2020 2021 2022
Dollars
per
gallon
D6 RIN values
• Obligated parties must submit Renewable
Identification Numbers (RINs) to show
compliance with the RFS
• Corn ethanol use generate D6 RINs
• Other categories for biodiesel, etc.
• RINs are tradeable; “should” only have
value when the RFS requires more use
than market forces alone would suggest
• D6 RINs have had a positive value
• $1.64/gallon D6 RIN value last week
• $2.19/gallon Chicago ethanol last week
(both according to OPIS)

7.
What could make the RFS less binding?
• Lower applied RFS
• Not just stated level, but considering effects of any small refinery waivers, etc.
• Lower feedstock (grain, sugar, vegetable oil, etc.) prices
• Higher overall fuel use
• Would increase quantity used, but each year’s requirement is a share of total fuel
• Greater ease of using biofuels
• For example, policy changes that make it easier to use higher-level ethanol blends
• Other policies that boost biofuel use
• California’s low-carbon fuel standard, biodiesel tax credits, etc.
• Maybe higher gasoline prices
• Would, all else equal, encourage greater proportional blending of biofuels
• But could reduce overall fuel use, so less ethanol use in standard 10% blends
7

8.
Suggests the importance of setting the RFS
and other biofuel policies
• U.S. Environmental Protection Agency has significant (not infinite)
discretion in setting RFS for future years—possible policy goals
• Push increased use—set the RFS higher
• Reward capacity—if more renewable diesel plants are planned or being built, expand
that portion of the RFS (chicken and egg issue)
• Try to satisfy biofuel & crop producers, oil refiners—probably can’t satisfy all 3
• Reflect changes in fuel demand—if fuel use drops with electric vehicles (EV’s), reduce
RFS and/or make renewable electricity to power EV’s eligible for RINs
• Maximize reduction in greenhouse gas emissions
• Address food and fuel consumer concerns
• Non-federal policies matter, too
• Low-carbon fuel standard in California encourages renewable diesel
• That can come at expense of ethanol and conventional biodiesel, depending on RFS
8

9.
U.S. ethanol use tied to gasoline use
0
20
40
60
80
100
120
140
160
0
2
4
6
8
10
12
14
16
2005 2010 2015 2020 2025 2030
Billion
gallons
Billion
gallons
Ethanol and gasoline use
Ethanol use (left) Gasoline use (right)
9
Source: FAPRI November 2022 preliminary baseline.
• 10% ethanol blends dominate; small
market shares for E-15, E-85 and
gasoline without ethanol
• Gasoline and ethanol use fell in 2020
as fewer miles were driven
• Gasoline use has not recovered to the
2019 level
• Average blend is now slightly over
10%--policy and consumer demand
will drive future blend rates

10.
U.S. corn ethanol use
10
0
1
2
3
4
5
6
12/13 17/18 22/23 27/28 32/33
Billion
bushels
U.S. corn ethanol, coproduct use
USDA FAPRI
Sources: FAPRI preliminary baseline, Nov. 2022; USDA long-term baseline, Nov. 2022
• November projections from both
USDA and FAPRI show relatively
flat projected U.S. use of corn to
make ethanol & coproducts
• In addition to ethanol to supply
the domestic market, FAPRI
projected an increase in U.S.
ethanol exports

11.
U.S. feed and residual use
0
50
100
150
200
250
02/03 07/08 12/13 17/18 22/23 27/28 32/33
Million
metric
tons
U.S. feed and residual use
Corn Corn coproducts
Soymeal Other
11
Source FAPRI-MU preliminary baseline, Nov. 2022
• From 2005-2012
• Higher corn prices contributed to
reduction in U.S. corn feed use
• Only partially offset by increased
use of distillers dried grains and
other coproducts of ethanol
• Since 2012
• General upward trend in U.S.
livestock production and feed use
• Dip in 2022/23: high prices,
reduced crop production
• We project modest growth

12.
U.S. corn and distillers grains exports
12
0
10
20
30
40
50
60
70
80
90
100
02/03 07/08 12/13 17/18 22/23 27/28 32/33
Million
metric
tons
U.S. exports
Corn DDGs
• Annual variation and trends in U.S.
corn exports
• Weather in U.S., other countries explains
much of annual variation (2012 drought)
• Ethanol use, of course, can affect
available supplies and market prices
• (Generally) upward trend since 2012
• 2022/23 U.S. corn exports are down
• Weather-reduced U.S. crop
• Competition from Brazil
• In spite of reduced exports from Ukraine
• More recent estimates: even larger
reduction
• In addition, U.S. exports 10+ million
tons of distillers grains each year
Source: FAPRI preliminary baseline, Nov. 2022.

13.
U.S. marketing year average (MYA) prices
13
0
1
2
3
4
5
6
7
8
12/13 17/18 22/23 27/28 32/33
Dollars
per
bushel
U.S. corn prices
USDA FAPRI Dec. futures
0
2
4
6
8
10
12
14
16
12/13 17/18 22/23 27/28 32/33
Dollars
per
bushel
U.S. soybean prices
USDA FAPRI Nov. futures
Sources: FAPRI preliminary baseline, Nov. 2022; USDA long-term baseline, Nov. 2022; CME Dec.
(corn) and Nov. (soybean) futures contracts, 7 a.m. central time, Jan. 24, 2023.

14.
U.S. crop yields and land use
14
0
50
100
150
200
250
300
350
400
2002 2007 2012 2017 2022 2027 2032
Million
metric
tons
U.S. planted and idled area
Corn Soybeans 11 other crops, hay CRP
Source: FAPRI preliminary baseline, Nov. 2022. Note: 11 other crops are wheat, sorghum,
barley, oats, upland cotton, rice, peanuts, sunflowers, canola, sugar cane and sugar beets
0
50
100
150
200
250
2002 2007 2012 2017 2022 2027 2032
Bushels
per
harvested
acre
U.S. corn and soybean yields
Corn Soybeans

15.
Thanks!
15
• FAPRI-MU website:
www.fapri.missouri.edu
• Follow us on Twitter: @FAPRI_MU
• To contact Pat Westhoff:
• 573-882-4647
• westhoffp@missouri.edu
This material is based upon work supported by the U.S.
Department of Agriculture, Office of the Chief Economist,
under Agreement #58-0111-21-012, and the USDA National
Institute of Food and Agriculture, Hatch project number MO-
C1537173. Any opinion, findings, conclusions, or
recommendations expressed in this publication are those of
the authors and do not necessarily reflect the view of the U.S.
Department of Agriculture nor the University of Missouri.
FAPRI-MU team:
• Julian Binfield
• Ben Brown
• Sera Chiuchiarelli
• Hoa Hoang
• Fazal Malakhail
• Bob Maltsbarger
• Marc Rosenbohm
• Juo-Han Tsay
• Wyatt Thompson
• Pat Westhoff
• Jarrett Whistance
• Peter Zimmel