Rising Ethanol Exports in the US Leading to Supply Chain Disruption

Of late, the US ethanol producers have been facing challenges in transporting petrochemical products like ethanol via road and rail due to rising demand for trucks and railcars. Lack of new pipelines to transport product and their plight of getting constructed on the back of financial and regulatory commitment issues have packed the void till the beginning of Q3 2014. Meanwhile, the ongoing increase of ethanol production hitting record levels will soon outpace consumption in the near future. This scenario is expected to push up the US exports of petrochemical derivatives like ethanol. However, US do not seem to have the efficient supply chain infrastructure to handle this unexpected opportunity. Can the US really become a strategic exporter of ethanol in the future? Why this anticipation about the increase in ethanol exports posing a challenge for a net exporter like the US? Isn't it high time for the ethanol producers to renovate their export models and infrastructure? This article mainly highlights the necessary improvements that need to be implemented by the ethanol producers to maximize their profits amidst increasing ethanol production and transportation issues that could bother the upcoming ethanol exports especially in the United States. Ethanol is an emerging bio-fuel in North American countries especially US and Canada. Apart from the blending mandates, the supply chain structure in the ethanol business impacts the stability of its various downstream markets on a long run. Ethanol producers usually risks from its feedstock, downstream and co-product sectors. The US ethanol market has an organized governance system as far as its spot and contract pricing is concerned including some of its upstream and downstream markets.   Author: Kondubhatla Raviteja