Summary: US ethanol production was down about 2% following a similar decline the previous week. Despite the drop in production, ethanol stocks surged 2%. Stocks are approaching the record level set in March last year. Blender demand was down after being up more than 2% the previous week. The futures-based producer margin continues to show a loss. However, some measures of “cash-based” producer margins indicate that returns are above break-even. Blender margins are profitable but remain low. The spread between Brazilian and US ethanol prices remains well below a year ago and is the lowest (for this time of year) in over 3 years, indicating that US ethanol is losing price competitiveness relative to Brazilian ethanol. In the Dec WASDE, USDA lowered their projection for corn grind by 50 Mil Bu to 5,600 Mil Bu. We believe that ethanol grind could be 100 Mil Bu smaller still.
US ethanol production through the week ending last Friday totaled 298 million gallons vs 303 the previous week and is down 3% from a year ago.
Ethanol stocks last week totaled 1,007 million gallons, up 20 million from the previous week and up 4% from last year.
Gasoline stocks last week totaled 257 million barrels, down 3 million from the previous week but up 6% from last year.
US crude inventories were 446 million barrels, up 1 million from a week ago and up 7% from last year.
The futures-based ethanol crush margin is displayed below.
The futures-based blenders’ margin is displayed below.
The spread between Brazilian and US ethanol FOB prices was lower this past week, and is below what it was at this time in each of the last three years.