Overview
The world’s two largest ethanol producers, the United States and Brazil, are seeing a resurgence in foreign demand for the biofuel as several fuel-consuming nations expand their sources of liquid fuel in response to continued tensions in the Strait of Hormuz. Industry representatives reported to Reuters that U.S. ethanol exports have climbed roughly 20% so far this year, following record shipments the previous year, and that Brazil could more than double its ethanol exports in the new 2026/27 trading season that began in April.
Export and production figures
The U.S. Renewable Fuels Association (RFA) reported exports of 638 million gallons in the first quarter, a level 20% higher year-on-year. Brazil’s consultancy Datagro estimated that ethanol exports will total 2.2 billion liters (581.1 million gallons) in the new season, up from 1 billion liters in the prior season.
Datagro also projects that Brazil will raise ethanol production by roughly 4 billion liters in the new season, reaching a record 41.4 billion liters. The RFA said the U.S. is expected to add about 1 billion gallons of ethanol production capacity within the next 12 to 18 months.
Why demand is rising
Industry officials point to the Strait of Hormuz crisis and the resulting concern over concentrated energy supplies as a primary driver for increased ethanol buying. "There are countries around the world that are looking to get their hands on any source of liquid fuel they can find," said Geoff Cooper, chief executive of the RFA, adding that U.S. ethanol prices are currently competitive compared to gasoline.
Datagro’s chief analyst, Plinio Nastari, said several countries, particularly in Asia, are raising ethanol blending rates in gasoline. "Some of them have some production, but they will need to import part of that ethanol," he said.
Long-term demand expectations
Renewable energy developers and investors described the heightened demand as likely to persist even if diplomatic progress reduces immediate tensions in the Strait of Hormuz. "Even if there is a deal soon between Iran and the U.S. to reopen Hormuz, renewable energy makers believe the higher demand is here to stay, due to energy security," industry sources said.
Shameek Konar, head of energy at Ara Partners, a private equity firm that invests in U.S. renewable energy projects including biofuels, said at the BMO Farm to Market Conference in New York that the recent conflict has pushed energy security to the forefront of policymaking. "This conflict brought energy security in the focus of every policy maker in the world," he said.
Market implications
Higher export demand would benefit the agricultural and processing sectors that supply ethanol feedstocks. In the United States, increased ethanol exports would be positive for corn producers and processors as production rises and demand for grains grows. In Brazil, higher foreign sales would support cane growers and mills by boosting demand for sucrose and related processing activity, which in turn could support prices in those markets.
The developments also revive an earlier, long-discussed initiative to create a global ethanol market. The two countries had previously discussed such a market during a 2007 state visit when U.S. President George W. Bush and Brazilian President Luiz Inacio Lula da Silva agreed on the concept, and the new surge in cross-border ethanol flows presents another chance to expand international trade in the biofuel.
Conference and industry context
Comments from industry leaders and analysts at conferences and in consultancy reports underline how shifting policy and geopolitical risk are translating into concrete market moves: increased blending mandates in some consuming countries, production expansions in both major producer countries, and a rise in short-term export volumes that follows already elevated shipments from the prior year.
Bottom line
As consuming countries diversify fuel sources amid geopolitical uncertainty, both the United States and Brazil are preparing to ship substantially more ethanol. The near-term rises in exports and planned capacity increases in both countries are expected to raise demand for feedstocks and support prices in agricultural and processing sectors tied to ethanol production.