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EPA Plan for Higher Ethanol Blends Will Boost US Corn Demand

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The US Environmental Protection Agency (EPA) said it will invoke an emergency waiver and allow higher ethanol blends into gasoline to be sold during the summer months to help combat surging fuel prices.

The move will benefit US corn farmers and producers of ethanol, a biofuel made from corn. More than one-third of all US corn goes into producing ethanol. US stocks of ethanol are currently near their highest level in two years.   

The EPA plans to allow a 15% blend of ethanol, known as E15, between June 1 and September 15. Historically, only a 10% blended product, or E10, is available in the summer months because of air pollution concerns. 

Most gasoline in the US is currently mixed with up to 10% ethanol, and only about 2% of gasoline retail outlets are currently equipped to dispense E15 fuel. If all those retail outlets switched to E15 year-round, the additional ethanol demand would amount to roughly 45 million gallons. That in turn would amount to roughly 15 million bushels of corn for feedstock, or 0.1% of last year’s total US corn production. 

The US produced some 15 billion gallons of ethanol in 2021. The EPA is expected to take final action to issue the emergency waiver closer to June 1.

But the impact on consumers’ wallets from allowing E15 year-round could be limited. Ethanol has about a third less energy than gasoline, so costs at the pump have to be low enough to offset the loss in efficiency from blending higher quantities of ethanol into the fuel. 

And with the price of corn also soaring to the highest levels in a decade, the savings over gasoline could be minimal. Russia’s invasion of Ukraine has halted exports from Ukraine, normally the world’s fourth-largest corn exporter. That has pushed more buying interest to the US, including from China, which bought 2.1 million tonnes of US corn in the past two weeks, its biggest purchase in nearly a year. 

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