-Ethanol production declines modestly
-Ethanol stocks tick higher
-Gasoline demand declines
U.S. ethanol production, for the week ended 7/31/20, declined to 931k barrels/day (274 million gallons/week) from 958k bpd (282 mil gal/week) the week prior, with the 27k bpd pullback being the largest weekly decline in 16 weeks as the COVID-related plunge in production began bottoming out in late April. Moreover, last week’s production reflected a 10.5% decline from last year’s same-week production of 1.040 million bpd (306 mil gal/week), also a setback from the previous week’s 7.1% year-over-year decline. Following Monday’s USDA Grain Crushings report, we adjusted our average weekly “needed” ethanol production pace in order to reach the USDA’s 2019/20 corn for ethanol usage estimate of 4.850 billion bushels to 956k bpd, which would be a 7.1% decline from last year’s final four weeks’ production. Accordingly, today’s data reflects a modest shortfall in production relative to the “needed” pace and will be watched closely in the weeks ahead, particularly in context of U.S. gasoline demand pulling back last week, as well. There have been concerns the sharp rise in COVID-19 cases across the south of late could detrimentally impact gasoline demand once again, which if true could very well add bushels back to the old crop corn balance sheet. Given the notable rebound in ethanol production over the last 6-8 weeks, though, we would not be surprised if USDA holds the line on their corn for ethanol usage estimate in the August 12 WASDE report as it appears the risk in their estimate has been reduced to around 5-15 million bushels vs previous ideas the shortfall could still be around 40-50 million bushels. If ethanol production runs 10% below last year’s pace through the end of August, 2019/20 total corn for ethanol usage would likely end up roughly 10 million bushels short of the USDA’s current projection. Interestingly, U.S. ethanol production has averaged 10.1% below last year over the last three week’s combined – exactly the same difference as U.S. gasoline demand relative to last year over the same period. Gasoline demand last week slipped to 8.617 mbpd, 10.7% below last year and right in line with the 10.5% decline in ethanol production.
U.S. ethanol stocks clearly appear to be leveling off after the mid-April through late June plunge with last week’s 855 million gallons (20.346 mil barrels) ticking up from the previous week’s 851 mil gallons (20.272 mil barrels) and have been in a rather tight range of 847-866 million gallons in five of the last six weeks. However, ethanol stocks are still a substantial 12% (116 million gallons) below year ago stocks and are the lowest for late July in five years.
