USDA Report Highlights Hurdles to Higher Ethanol Blends

Biofuel and farm groups see E15 and other higher blends of corn ethanol into gasoline as the strategy to increased sales, but the current structure of the Renewable Fuel Standard “does not serve to incentivize ethanol blends higher than E10,” according to a report from USDA’s Office of the Chief Economist. The report “evaluates market conditions and provides an analysis of barriers for higher ethanol blends, including technical, regulatory, consumer acceptance, and economic challenges.”

Start a $1 Pro Farmer trial to unlock premium market news & analysis for 1-month.

The report concludes, “Looking forward, there are concerns about possible ethanol demand reductions given the projected reduction in gasoline demand in the coming decade. Given the decline in FFVs (flex fuel vehicles) and lack of growth in E85 sales, mid-level ethanol blends, in particular E15, are options to expand future ethanol markets. Furthermore, transitioning to ethanol blends between E11 to E25 will be easier and less costly than blends above E25. The current structure of the RFS, combined with the commercialization stage of cellulosic fuels, does not serve to incentivize ethanol blends higher than E10. Federal and State policies are providing incentives for the conversion of refueling infrastructure. Finally, resolution and clarity relative to the permissibility of E15 to be sold year[1]round will have implications for the marketability and expansion of E15. Gas stations are less likely to invest in infrastructure for a fuel that can only be sold for a portion of the year.”

Click here to view the full report.