NASS pegged corn used for fuel ethanol in the month of July at 454.8 Mil Bu, down fractionally from July of 2016, but still historically strong. Using EIA weekly data, which in recent weeks has surged along with production margins, ARC pegs corn used for the biofuel in August at near record 473 Mil Bu. Barring any major surprises in this week’s EIA report, ethanol’s corn demand draw in 16/17 is then calculated at 5,430 Mil Bu. The USDA current pegs ethanol demand at 5,450 Mil Bu, but as ethanol data won’t be made official until early Oct, a revision in next week’s report is not expected. ARC also mentions that US corn exports may be understated 25-50 Mil Bu based on the pace of shipments date, which along with lower yield could make the Sep and/or Oct US corn balance sheets interesting.
The US ethanol industry, and energy industry as a whole, will remain strong into 2018. The big question, however, is the fate of US ethanol exports beginning in autumn, and whether the perceived blend wall will be exceeded like it has been since 2016. There’s been no indication yet that non-domestic ethanol disappearance has slowed down, but recall in August Brazil approved a 20% tariff on ethanol imports from the US in excess of 600 Mil Liters. Gulf ethanol this week is offered at a $.25/Gal (15%) discount to Brazilian origin for Sep/Oct arrival. However, the graphic at left shows that Gulf ethanol is no longer competitive when adding the tariff – but is also not overly expensive. More than Brazil’s gov’t policy, the ethanol cash market will determine future trade flows. And there’s strong talk of sizeable expansion in US ethanol plant capacity over the next year or so.
Biodiesel imports in June totaled 73 Mil Gal, with 69 Mil Gal (94%) sourced from Argentina. The other 4.5 Mil Gal arrived from Canada. The spike in Argentine imports was expected, as the Argentine trade data showed a significant spike in May exports. June and July exports to the US were slower as the government lowered the export quota to 0% of monthly production, while the August trade data showed Arg exports to the US dropping to a 6 month low. Following the Commerce Dept’s ruling against Argentine biodiesel imports, a sharp decline is expected in the last half of the year. A year ago, 21% of the total US biodiesel supply was imported, and the loss of Argentine and Indonesian imports should allow for stronger domestic production/vegoil demand