Texas could benefit from Chinese demand for alternative fuels

China offers opportunity for U.S. ethanol export market

It's been called a volatile market at best, but China's objective of relying more on renewable fuels has prompted some analysts and more than a few speculators to monitor Chinese demand for ethanol and biofuel products in recent months as China struggles to grow its dependency on and use of renewable fuels over the next five years.

The U.S. Department of Agriculture (USDA) announced last week a significant jump in ethanol exports to China this year. While the final numbers won't be known until next month, U.S. trade officials say the jump in exports has been “significant.”

"U.S. ethanol exports to China have jumped from $8 million to more than $86 million since our May 2014 visit. In October, we exported more ethanol to China than in the previous 10 years combined," says USDA Under Secretary for Farm and Foreign Agricultural Services Michael Scuse.

Scuse led a USDA trade mission to China last year that included representatives from nine state departments of agriculture and 28 U.S. companies, including those involved in renewable fuels, to explore opportunities for trade in the region.

China is already the largest market for U.S. food and farm products, and U.S. agricultural exports to the country tripled over the last decade, now accounting for nearly 20 percent of all foreign sales of U.S. farm products.

"Our objective for every trade mission is to create new markets for farm products made in rural America," said Scuse.

He reported that the delegation's mission was not only to promote U.S. agriculture in general but to explore the role that renewable fuels might play in China's long-term clean energy strategy. The group met with gasoline companies, fuel blenders, oil companies, commodity traders, and government officials to promote the benefits of using higher ethanol blends.

During October, the U.S. exported 32.5 million gallons of ethanol to China, valued at $57 million, or 46 percent of total U.S. ethanol exports for the month. Previous U.S. exports of ethanol to China averaged less than $3 million annually from 2005 to 2014.

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While the renewable biofuels policies of China can and have changed dramatically over the last few years, analysts are predicting increased export opportunities for U.S. ethanol and biofuel companies, and this could prove beneficial in Texas, where the state economy remains one of the strongest in the nation in spite of challenges for the oil and gas industry over the last 18 months.

Texas managed to keep growing last year despite crude oil prices that dropped as much as 50 percent over the course of the last 12 months. A barrel of crude oil plummeted from over $100 last summer to about $50 by the end of the year. According to a CNN Money report published in June, even during the 2008 recession, Texans were not too worried about finding jobs because of the shale gas boom. Now, despite the weakening energy sector, the Texas economy continues to exude strength.

TEXAS RESEARCH EFFORTS

Researchers at Texas A&M AgriLife recognize the potential of renewable fuels development and have been hard at work paving the way for Texas to take advantage of the alternative energy industry as one way to keep the state's economy liquid.

Texas A&M AgriLife bioenergy research spans the full range of discovery – from developing high-tonnage biomass plants at the molecular level to developing more efficient processes to manufacture biofuels. In fact, the university's comprehensive bioenergy program has made AgriLife Research a national leader in bioenergy and bioproduct research, development, and commercialization, due largely to its innovative science-based programs, expertise, infrastructure, and partnerships. The bioenergy program includes management of research projects and facilitating faculty research.

High-tonnage sorghum and other crops developed specifically for biomass for bioenergy have attracted attention throughout the U.S. and the world. Lignocellulosic feedstocks include high-tonnage sorghum, energy canes, and hybrid sweet sorghum. Economically sustainable oilseed crops for biodiesel and bioproducts production are varied and include jatropha, castor, cottonseed, and sunflower. Also, A&M researchers say due to its very high oil content, microalgae garners interest for production of jet fuels and other bioproducts.

AgriLife Research has an operating pilot plant in Pecos, Texas, with future plans to construct two more plants in the near future.

"These are the kinds of initiatives that strengthen our rural communities, and open new doors and help our farmers and ranchers capitalize on the tremendous export potential for American agricultural products," said Scuse.

OPPORTUNITIES FOR TEXAS

Regardless whether the Chinese market continues to increase imports of ethanol and biofuel products in the future, Texas' investment in the development of renewable fuels could provide substantial opportunities for a state that has long led the way in energy development, and a way to boost the economy. And whether that growth happens as a result of ethanol production or some other area of crop production, farmers in Texas stand to benefit.

Earlier this year, USDA partnered with 21 states through the Biofuel Infrastructure Partnership (BIP) to nearly double the number of fueling pumps nationwide, expanding the ethanol refueling infrastructure by nearly 5,000 pumps, a $210 million investment that will give consumers access to clean, American-made biofuels, and provide more choices at the pump.

Scuse says the past seven years represented the strongest period for American agricultural exports in the history of our country, with U.S. agricultural product exports totaling $911.3 billion between Fiscal Years 2009 and 2015.

In fiscal year 2015, American farmers and ranchers exported $139.7 billion of food and agricultural goods to consumers worldwide. Not only that, U.S. agricultural exports supported more than 1 million American jobs both on and off the farm, a substantial part of the estimated 11.7 million jobs supported by exports all across our country.

Texas has benefited greatly from growth in agriculture export, and, according to analysts, is well positioned to continue that trend in the years ahead.

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