Markets Wired

The Commission has issued the report, “2008 Report on Ethanol Market Concentration.” This is the Commission’s fourth annual report on the state of ethanol production in the United States, as required by the Energy Policy Act of 2005. The report concludes that the U.S. fuel ethanol market, measured on the basis of production or capacity, remains unconcentrated.

As of September 2008, 160 firms produced ethanol in the United States – a one-year increase of 57 firms. The largest ethanol producer’s share of capacity has continued to fall each year as new firms have entered the market and existing firms have added capacity. Currently, the largest producer accounts for approximately 11 percent of domestic ethanol capacity, down from 16 percent in 2007, 21 percent in 2006, 26 percent in 2005, and 41 percent in 2000.

FTC staff used three different methods to calculate concentration of the ethanol production industry. Specifically, staff calculated concentration based on the production capacity of each individual producer, on the production capacity of each producer when attributing that producer’s capacity to the firm responsible for marketing the producer’s ethanol, and on actual production rather than capacity. The report concludes that the level of concentration in ethanol production would not justify a presumption that a single firm, or a small group of firms, could wield sufficient market power to set or coordinate price or output levels. In addition, the ease of entry by new firms and the availability of ethanol imports provide additional constraints on current market participants.

The report, which is available on the Commission’s Web site and as a link to this press release, was submitted to Congress and the Administrator of the U.S. Environmental Protection Agency, as required by Section 1501(a)(2) of the Energy Policy Act of 2005, as codified at 42 U.S.C. § 7545(o)(10). The Commission vote to issue the 2008 report, which was prepared by the staff of the Bureaus of Competition and Economics, was 4-0. (FTC File No. P063000; the staff contact is John H. Seesel, Associate General Counsel for Energy, Office of the General Counsel, 202-326-2702.)

Copies of the documents mentioned in this release are available from the FTC’s Web site at http://www.ftc.gov and from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. Call toll-free: 1-877-FTC-HELP.

(FYI 55.2.2008.wpd)