Summary: US ethanol production surged 10% following several weeks of decline brought about by extremely cold temperatures. Despite the surge in production, ethanol stocks dropped nearly 2%. However, stocks remained above the levels they were at in each of the last two years. After several months of being below breakeven, the futures-based producer margin broke into positive territory. 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 January WASDE, USDA lowered their projection for corn grind by 25 Mil Bu to 5,575 Mil Bu. We believe that ethanol grind could be 75 Mil Bu smaller still.
US ethanol production through the week ending last Friday totaled 313 million gallons vs 284 the previous week and is up 1% from a year ago.
Ethanol stocks last week totaled 986 million gallons, down 20 million from the previous week but up 3% from last year.
Gasoline stocks last week totaled 258 million barrels, nearly unchanged from the previous week but up 4% from last year.
US crude inventories were 451 million barrels, up 4 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.