Snapshot of Latest Data
Transportation of Ethanol
Transportation is pivotal to all links in the ethanol supply chain from feedstock production to processing, storage, biofuel production, blending, and distribution to consumers. Aside from moving ethanol and its inputs at each step in the supply chain, transportation also affects how the supply chain is structured. For instance, the relative cost of moving biomass versus biofuel and coproducts is a key factor in decisions over placement of biofuel plants—i.e., whether locate them near farms (typically concentrated in the Midwest), or near consumers (typically in high-population coastal regions).
The ethanol supply chain relies on railroads, trucks, and barges to transport ethanol from production or import locations to blending terminals. At the terminals, near the point of retail distribution, the ethanol is blended with gasoline. Trucks are most critical for the short-distance movement of harvested biomass from farms to local terminals, elevators, or nearby biorefineries for conversion to ethanol. However, once ethanol is produced, railroads are the primary movers of ethanol and its coproducts over long distances to where it is consumed or exported. Roughly 15 to 20 percent of these movements originate on short line railroads. In recent years, railroads have kept up with rapid ethanol production increases, moving over 70 percent of all U.S. ethanol produced.
After feedstock and energy, transportation is typically the third-highest contributor to the wholesale cost of ethanol. For an ethanol plant, balancing transportation operating expenses with fixed infrastructure costs can be critical to sustained profitability.
The demand for shipping ethanol to export markets has also risen with the surge in U.S. ethanol production. While shipments to Canada and Mexico are primarily by rail or trucks, shipments to other destinations are by ocean. Although blending mandates have affected U.S. fuel ethanol exports to some countries, others may use it only as an additive to gasoline.
Ethanol stocks over time in different U.S regions can help to illustrate the “when” and “where” of ethanol transportation demand, both for the recent past and near future. Ethanol stocks can also help us better understand recent export numbers as well as rail carload and barge movements .
The pattern of U.S. trade in ethanol changed significantly after 2010. That year, because the U.S. domestic ethanol market was saturated and Brazilian ethanol exports were less available to the rest of the world, the United States became a large exporter of ethanol and has remained one since then. As exports have grown, so, too, to have rail movements of ethanol to the coastal export regions.
Exports of Distillers’ Dried Grains with Solubles (DDGS)
The primary coproduct of ethanol production is distillers’ grains. About a third of every bushel of corn used to make ethanol ends up as distillers’ grains, which is about 17.5 pounds, if dried to an approximate 10-percent moisture content. Distillers’ grains are popular with dairy producers and beef cattle feeders, and used less with hogs and poultry. Distillers’ grains can be sold in wet form, or else, dried to produce distillers’ dried grains. If the solubles left over from distillation are re-added, the product is referred to as distillers’ dried grains with solubles (DDGS). The product is less energy intensive and less expensive when sold in wet form, but its heavy weight requires it to be sold to locations near ethanol plants to avoid high transportation costs. DDGS, which is lighter and easier to transport, is sold to more distant locations. As exports have remained strong, the ethanol industry has continued to market DDGS overseas successfully.
Bulk and Containerized DDGS Shipments
Exports of DDGS can easily shift between bulk and containerized ocean shipping. Several factors–such as container availability, freight rates, and shipment volume–determine the economic viability of bulk versus container. The growth in DDGS exports and changes in destination markets may also require the market to shift between bulk and containerized shipments. For example, some emerging destinations require mostly bulk shipment of DDGS whereas others can only accept containers.
Monthly containerized DDGS data can be found here.
Transportation of Biodiesel
Biodiesel is a mixture of chemical compounds known as alkyl esters produced from a variety of vegetable oils, fats, and greases. About three-fourths of the U.S. total biodiesel feedstock is composed primarily of vegetable oils. For U.S. biodiesel production, soybean oil is the most used vegetable oil (30 percent of total soybean oil production), accounting for slightly more than half of total inputs by weight. Distiller’s corn oil and canola oil are used in smaller quantities. Soybean oil and distiller’s corn oil are commonly used feedstocks, because these are produced in the Midwest, where most biofuel production capacity exists. Growth in biodiesel production has coincided with Federal biofuel mandates. Most of the biodiesel capacity is found in the Midwest where soybean oil and distiller’s corn oil are the predominate feedstocks.
Truck, rail and barge are the three primary ways to transport from the point of production to fuel terminals and wholesalers. B5 (up to 5 percent biodiesel) is sometimes shipped by pipeline. Most biodiesel distributors will deliver B20 (6-20 percent biodiesel) or B100 (pure biodiesel), depending on the retailer’s preference. Short-distance transportation is dominated by trucks, and ships transport large amounts of biodiesel between continents. Apart from cost, timing is a factor when choosing a distribution method. For example, trucks are more flexible in comparison to rail, offering a faster pickup and delivery schedule. Other factors in choosing a distribution method include the origin (facility location), receiver’s destination, the receiver’s access to rail service, and the receiver’s ability to handle large volumes.
As U.S exports of biodiesel have increased, so too has the amount of biodiesel shipped by rail to ports. Rail, rather than barge, has been the primary method to get biodiesel to export. Canada, Peru, and the Netherlands have been the top three markets for biodiesel exports in recent years.