Canada could be the saviour of the corn market, says an analyst.
Scott Irwin, an agricultural economist at the University of Illinois, said the corn ethanol market in the United States is under duress from electric vehicles and other factors.
Total U.S. ethanol exports are forecast at a record 1.87 billion gallons in 2024.
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“We’ve really been on a tear ever since the COVID recovery started in 2022,” he said during a recent Farmdoc webinar hosted by the university. “Much of that is associated with our friends up north in Canada.”
Sales to Canada are forecast at 668 million gallons, more than double what they were a few years ago. That is primarily due to Canada’s new Clean Fuel Regulations, which were implemented in July 2023.
It also has something to do with increasing provincial mandates. Ontario’s 10 per cent (E10) mandate is gradually climbing to 15 per cent (E15) by 2030.
Irwin believes the Canadian market is on its way to importing 700 to 800 million gallons of U.S. ethanol per year, or perhaps even more. That will help offset declining domestic consumption of the fuel.
U.S. domestic consumption is down for two reasons: remote work and electric vehicles.
The U.S. consumed 137 billion gallons of gasoline in 2023, down from the pre-COVID level of 143 billion gallons.
“We’ve seen a sharp recovery post-COVID, but not all the way back,” Irwin said.
That “missing” six billion gallons amounts to about 600 million gallons of lost ethanol use. Irwin said people started working at home during COVID and that reduced gasoline consumption due to reduced commuting.
Electric vehicles are the other big threat to demand but not as much as once feared.
“Despite all of the headlines, internal combustion engine vehicles are still over 80 per cent of new car sales in the United States,” said Irwin.
Electric vehicles account for a “tiny sliver” of the 290 million light duty vehicles in the U.S.
“We’ve really had very small gasoline demand destruction to date from the sale of electric vehicles.”
Battery electric vehicle (BEV) sales plateaued in 2024 due to mounting problems with range, repairs, charging times, costs and reliability. Sales of hybrids have been much better, but they only result in a 40 per cent drop in fuel use compared to 100 per cent for BEVs.
Continued adoption of electric vehicles will result in less gasoline consumption in the future. That will result in around one to 1.2 billion gallons of lost ethanol demand by 2030 compared to 2024 levels, which equates to between 326 and 419 million bushels of lost corn demand.
“This is probably a lot smaller than a lot of expectations that are out there,” said Irwin.
The recent election of Donald Trump as the next president of the United States poses a threat to the biofuel sector. The good news for ethanol is that it “can stand on its own two legs” due to its value as an octane-enhancer.
Ethanol is priced at about US$1.71 per gallon compared to its main competitor, which is priced $3.21 per gallon.
“Ethanol is firmly ensconced in gasoline blending due to its cost competitiveness as a source of octane in gasoline blends,” he said.
