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-Ethanol production jumps to 31-week high
-Ethanol stocks continue to surge – back to 15-week high

U.S. ethanol production, for the week ended 01/10/20, jumped to 1.095 million barrels/day (322 million gallons/week) from 1.062 mbpd (312 mil gal/week) the week prior, representing a 31-week high and the 4th highest weekly production on record since EIA began reporting weekly data in June 2010. In the face of weakening margins of late, the surge in production was a bit unexpected for sure. Ethanol production for the week was up 4.2% from the same week last year of 1.051 mbpd (309 mil gal/week), extending to six consecutive weeks in which production has run solidly above year ago levels, averaging +4.0% during the period. Based on the USDA’s 5.375 billion bushel annual corn for ethanol usage projection, we estimate ethanol production will need to run roughly 1.5% above year ago levels, on average, though the end of August. This should not be a problem over the next three months or so as production during January-March last year was quite weak as seen in the 2nd chart below. After that, though, production picked up solidly and ran at rather respectable levels during May-June. In additional to the strong production last week, the first imports in five weeks were seen, as well, of a modest 7.4 million gallons.

The surge in U.S. ethanol stocks continued for the 2nd week in row with another 23 million gallon (544k barrel) increase to 966 million gallons (23.006 mil barrels) following the previous week’s record 60 million gallon jump. In just two weeks, ethanol stocks have rebounded from near 3-year lows to a 15-week high and above average stocks throughout 2019 of around 958 million gallons. The solid rebound in stocks, in conjunction with weakening margins, could see production rates begin to slow, but are likely to remain above year ago levels, nonetheless. U.S. gasoline demand last week rose to 8.558 mbpd from 8.133 mbpd the week prior and was essentially unchanged from year ago same-week demand of 8.565 mbpd. Gasoline demand during the 2019/20 corn marketing year so far is running, on average, 0.8% above last year based on the EIA’s weekly data.

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