Biden's year-round E15 sales plans could boost corn demand

US corn demand and ethanol sales are set to climb as a result of President Joe Biden's plans to boost the use of "home-grown" biofuels in a bid to cut rising pump prices, especially the temporary year-round use of the E15 ethano blend.

Sources told Agricensus on Tuesday that Biden's decision, published in a White House statement on April 12, could soon add about 15 mbu of additional corn demand.

As per the statement, Biden revealed today that the Environmental Protection Agency (EPA) would allow the sale of E15 gasoline this summer, which the White House said marks the "latest step in expanding Americans’ access to affordable fuel supply and bringing relief to Americans suffering from "Putin’s Price Hike at the pump."

According to the White House, the EPA will issue a national, emergency waiver on April 12, allowing E15 to be sold from June 1st to September 15th — final action for which will take place "closer to June 1".

The news resulted in an uptick in corn futures, which traded up by around 1.5% early Tuesday and currently sit near all-time highs, while shares of US ethanol producer Green Plains rose by approximately 6% on the news.

Meanwhile, shares in the refining company Valero - one of the largest ethanol producers in the US - was up by some 2% on Tuesday morning.

Senior grain and oilseed commodity analyst at Futures International Terry Reilly told Agricensus that the short-term waiver granting the sale of E15 this summer will bring about "zero" change in terms of corn demand.

However, "long term, if it stands, I look for corn for ethanol use to go up 100 million bushels, then 200 only if gas station adapt to it," Reilly said, adding that the rule would benefit Midwestern states and "then others after investment."

Most of the 2,500 E15 stations are located in the US Midwest.

According to Advance Trading risk advisor Kelly Herrick, annual gasoline usage across the US was 135 billion gallons.

"An extra 5% across that window with the 1.5% E15 saturation would amount to 30 million gallons - so bump it a bit for seasonal usage and bigger stations with market share - you maybe could see 50 million gallons of increased demand or 12-15 mbu of additional corn usage," Herrick said.

The US president is under intense political pressure to reduce fuel costs for US drivers ahead of mid-term elections in November, in which Republicans hope to recapture both houses of Congress.

The news comes just a week after Agricensus sister-publication EnergyCensus reported that Biden was assessing what relief the year-round sale of E15 could bring to the US fuel prices, which had skyrocketed in the past month following a move from the US, EU, and the UK to ban or restrict imports of Russian crude oil and gas after president Putin ordered his forces to fully-invade Ukraine.

News that the President was assessing the situation came as pressure mounted from a bipartisan group of 29 members of the House of Representatives, which urged Biden in a March 31 letter to quickly authorize year-round sales of E15 and refrain from reducing renewable volume obligations (RVOs) under the Renewable Fuel Standard (RFS).

Furthermore, the EPA is also considering additional action to facilitate the use of E15 year-round beyond this summer, which includes ongoing discussions with states that have expressed interest in allowing year-round use of E15 and considering modifications to E15 fuel pump labeling.

"Allowing higher levels of blending will also reduce our dependency on foreign fuels as we rely more heavily on homegrown biofuels," the statement said, adding that this would help the US "bridge towards real energy independence."

Higher use of ethanol is not universally popular, however, with green groups and some policymakers warning that increased use of corn in higher ethanol blends will stoke demand for the crop at a time that global supplies of food, feed, and fertilizer are being tested by the war in Ukraine, blockades of Black Sea ports and sanctions.

Last month, a group of US senators introduced a new bill – the Home Front Energy Independence Act – aiming to boost biofuel use while simultaneously putting President Biden's executive order banning the import of Russian oil and petroleum products into law, which included the year-round sale of E15.

This came after several missed attempts by the ethanol and biofuel industries to boost the availability of the higher ethanol grade gasoline across the US, with the latest blow received in January when the US Supreme Court rejected a petition filed by industry groups calling for a review of a prior ruling outlawing the year-long sale of higher blends year-round.

Total US ethanol production slipped in the week ending April 1 to 1.03 million b/d, according to the US Energy Information Administration (EIA), representing a much larger than expected week-on-week decrease of 33,000 b/d.