The US Ethanol Market is in a Dilemma as Brazil Raises the Bar for Import Tariff

Texas- A letter has been proposed by the US Senator regarding the import tariff imposed by the Brazilian government. US President Joe Biden had a meeting with the President of Brazil, Lula da Silva, in February 2023 to discuss political and business issues. In the letter, the senator requested him to use a meeting with the president of Brazil to discuss the nation's tariff on imported US Ethanol. US and Brazil are the major producers of Ethanol globally and usually showcase competitive behavior for their trading. The US uses Corn as its upstream element, whereas Brazil consumes Sugar as the upstream component. In mid-February, the final prices of Ethanol ranged between 720 to 770 per MT, FOB Texas (USA).

The letter was sent in response to the Brazilian Foreign Trade Chamber's decision to reimpose an import tax on American Ethanol intended for Brazil. Changes have been made in the plant by the Brazilian government to elevate its domestic Ethanol sales and favor its domestic inventories. The new Ethanol tariff rate is 16 percent for this year and 18 percent until 2024. Brazilian Ethanol tariffs had been zero since March 2022 before this declaration, which helped to lower fuel prices for Brazilian drivers and decrease pressures for inflation. Leveling the competitive landscape for mutual Ethanol commerce is the zero percent tariff, which matches the zero percent tariff charged by the US on Brazilian Ethanol.

According to the US Energy Information Administration, the US Ethanol stockpile has declined along with production. These fluctuations also have concerned vehicle owners as Gasoline prices are anticipated to rise with a shortage in quantity and with inclining demand for E15 Gasoline for commercial purposes. As per ChemAnalyst, in upcoming weeks, the final prices of Ethanol are expected to rise slightly on account of continuous demand supply and weak stockpile availability in the US market.