Summary
Ethanol producers are battling with narrowing margins and excess supply.
The industry faces uncertain regulatory support and relatively mild near-term gasoline demand growth amid increasing supply.
This suggests a challenging near-term outlook for the industry.
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The United States is the world's largest ethanol producer and almost all of U.S. ethanol produced is based on corn as a feedstock.
America's rapid increase in ethanol consumption was largely driven by the federal government's ethanol mandate - known as the Renewable Fuel Standard - a 2007 law that requires an increasing amount of alternative fuels to be blended into gasoline.
The mandate was aimed at reducing greenhouse gas emissions and reducing America's dependence on imported oil.
Source: Brown Brothers Harriman
That was the year when crude oil was headed towards a record US$ 142.27 a barrel and America's gasoline consumption was at peak levels.
America's shale boom however, ushered an era of abundant and cheap oil supply in the United States; domestic output reached its highest levels since the 1930s and prices plunged to a 12-year low of US$ 26 per barrel.
