The U.S. ethanol industry is poised for significant growth in 2025, particularly through export markets, which are increasingly viewed as the most attractive opportunity for bolstering demand. According to Jacqui Fatka, a farm supply and biofuels economist at CoBank, the anticipated rise in ethanol usage in higher-level blends is notable; however, this segment currently constitutes only a small fraction of total ethanol demand due to the overall market size. Without substantial investments in infrastructure that would enable retailers to modify pumps or signage, substantial increases in nationwide sales of E15—a blend of 15% ethanol and 85% gasoline—are unlikely in the near future. Therefore, focusing on the export market emerges as the most viable strategy to enhance U.S. ethanol demand in 2025.

In a recent report released by the U.S. Energy Information Administration on April 2, it was highlighted that fuel ethanol production in the United States experienced a modest increase of 1% during the week ending March 28. Meanwhile, fuel ethanol stocks saw a decrease of 3%, and exports suffered a staggering drop of 62%. This data underscores the fluctuating dynamics of the ethanol market, particularly in the context of international trade.

“The numbers don’t lie. The world is looking to the U.S. to meet its fuel needs, and American producers are delivering in a way that supports economic growth both abroad and within our rural communities,” stated a representative from the sector. As new trade priorities are implemented by the current administration, there is optimism surrounding collaborative efforts with President Trump and his team to leverage this momentum, ultimately aiming to bolster the American farm economy through increased sales of U.S. ethanol internationally.

The United States continues to solidify its position as the world's leading producer and exporter of fuel ethanol, with prices remaining relatively stable throughout 2024. Brazil follows closely as the second-largest producer and exporter. According to data released by Growth Energy, the largest biofuel trade association in the nation, U.S. ethanol exports reached an unprecedented high in 2024, totaling 1.9 billion gallons valued at $4.3 billion. This achievement not only surpassed previous volume records set in 2018 but also exceeded the prior value record established in 2023.

The ethanol industry is primarily fueled by companies engaged in the manufacture, distribution, and sale of ethanol, which is a biofuel derived from crops like corn and sugarcane. The global ethanol market is booming, with recent studies by Precedence Research indicating that it was valued at $106.20 billion in 2024, with projections suggesting it will grow to $111.64 billion in 2025. The market is expected to exceed $174.98 billion by 2034, reflecting a compound annual growth rate (CAGR) of 5.12% from 2024 to 2034. In North America, the ethanol market alone is estimated to be worth $60.53 billion in 2024, growing at a CAGR of 5.20% during the same period.

In light of these developments, we recently published a curated list of the 12 best ethanol stocks to consider investing in, particularly those favored by hedge funds. One notable stock on this list is Bunge Global SA (NYSE:BG), a prominent player in the food technology and ingredient development sector. Bunge's performance has seen fluctuations since its IPO in 2001; however, the company has consistently managed to increase its dividend over time. Its Sugar and Bioenergy segment focuses on the production of sugar and ethanol while also generating electricity through the burning of sugarcane bagasse.

Bunge Global SA is nearing the conclusion of regulatory processes in China and Europe after securing permissions from the Canadian government regarding the Viterra acquisition. This strategic move is expected to establish a $25 billion powerhouse capable of competing with some of the biggest agricultural firms globally. Additionally, the company reported the completion of its Brazilian joint venture sale for sugar and bioenergy in FY 2024.

In terms of shareholder value, Bunge Global demonstrated its commitment by repurchasing $1.1 billion of stock in 2024. The company ended the year with a robust cash balance of $3.3 billion and $8.7 billion in unused committed credit facilities, signifying its strong liquidity position. On the sustainability front, Bunge made history by becoming the first international commodity exporter to ensure 100% traceability for both direct and indirect soy purchases in Brazil’s priority regions, showcasing its commitment to responsible sourcing.

Overall, Bunge Global SA ranks fourth on our list of the best ethanol stocks to buy according to hedge funds. While the potential of ethanol companies is evident, we believe that artificial intelligence (AI) stocks may offer even greater opportunities for higher returns in a shorter time frame. For those seeking promising AI stocks, particularly those trading at less than five times their earnings, we recommend checking out our report on the most affordable AI stock currently available.

To read more insights, check out our piece on the 20 Best AI Stocks to Buy Now and 30 Best Stocks to Buy According to Billionaires.

Disclosure: None. This article was originally published at Insider Monkey.