If the Transatlantic Trade and Investment Partnership, or TTIP, currently being negotiated by the United States and the European Union becomes reality, a recent analysis by the Center for Agricultural and Rural Development said ethanol and biodiesel produced in the United States would benefit.
With current market conditions both the EU and the United States have a number of what CARD says are market-distorting features in place that could be lifted through the TTIP. This is not to be confused with the Trans Pacific Partnership, or TPP, waiting for Congressional approval.
The latest CARD analysis said most notably, "major distortions" have been created through biofuels mandates in effect in both the EU and the United States.
"Border protection of ethanol in the European Union depends on preferential agreements and the statistical classification of ethanol-related products," CARD said.
For example, numerous fuel blends are imported into the EU with different classifications. There are tariffs in place on ethanol imports for both denatured and un-denatured ethanol. The United States faces anti-dumping duties that will expire by 2018.
"The liberalization of trade between the European Union and the United States has a large impact on ethanol markets," CARD said.
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"In the European Union, ethanol price falls by 15% and there is a massive increase in imports (from the United States) and a substantial fall in ethanol output as well for DDGs (dried distillers grains). In the United States, production is stimulated and exports more than double (121% increase) stimulated by the EU trade opening and higher prices."
What's more, the CARD analysis says DDGs exports would expand by 40% and their price would fall.
"Feedstock use in each region experiences associated changes," CARD said.
"In the European Union, feedstock use (coarse grains and wheat in industrial use) and associated imports fall along with the price of coarse grains; lower DDG output is compensated by larger DDG imports."
CARD said the reverse would be true in the United States "with an expansion of coarse grains used in industrial use (ethanol), a reduction of coarse grain exports, and a small increase in coarse grain production responding to higher corn prices."
In addition, CARD said the passage of the TTIP would be beneficial to the biodiesel industry in the United States, and not so much for industry counterparts in the EU.
That is, EU biodiesel production would contract by about 3%, according to CARD, while EU imports would expand by about 23%. "In the United States, biodiesel expands by 19% and exports more than double to the European Union," CARD said.
Vegetable oil and oilseed use also would change along with changes in the biodiesel market. CARD said in the European Union, industrial use of oils would contract by nearly 4%, oil and meal production contract by 2%, along with the volume of oilseeds crushed.
"Meal imports from the United States make up for the reduced domestic availability of EU meal," CARD said. "U.S. oil and meal production expands by roughly 13% with more oilseeds being crushed (a 15% increase in industrial use) and fewer oilseeds being exported (an 18% reduction).
"Given the small changes in relative prices for grains and oilseeds, the changes in production for these commodities are small in both countries."
Read the CARD analysis here, http://tinyurl.com/…
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