-Ethanol production declines for 2nd consecutive week – below USDA corn demand “needed” pace
-Ethanol stocks decline back to recent lows
U.S. ethanol production, for the week ended 8/07/20, declined for the 2nd consecutive week, falling to 918k barrels/day (270 million gallons/week) from 931k bpd (274 mil gal/week) the week prior and was 12.2% below last year’s same-week production of 1.045 million bpd (307 mil gal/week). After recovering to a 7.1% year-over-year decline two weeks ago, U.S. ethanol production slipped back to an average 11.3% YOY decline over the last two weeks. As the 2019/20 corn marketing year draws to an end with 3 1/2 weeks remaining from today’s data “as of” date, we estimate ethanol production would need to average roughly 5-6% below last year through the end of August in order for the USDA’s 4.850 billion bushel corn for ethanol usage estimate to be met. That appears unlikely at this time, but a further reduction in the USDA’s estimate appears likely to be limited. If ethanol production averages roughly 10% below last year through the end of the month, 2019/20 total corn for ethanol usage could fall 10-15 million bushels short of the USDA’s current estimate. We would also note U.S. gasoline demand, while rising modestly last week to 8.883 mbpd from 8.617 mbpd the week prior, held at a 10.6% YOY decline, essentially unchanged from the previous week’s 10.7% decline and off from the best COVID-recovery weekly decline of 6.1% four weeks ago. Since then, U.S. gasoline demand has averaged 10.2% below last year. We would not be surprised if USDA holds the line on their 2019/20 corn for ethanol usage estimate in today’s pending WASDE report, as the potential shortfall has lessened of late.
U.S. ethanol stocks last week fell back to 830 million gallons (19.750 million barrels) from 855 million gallons (20.346 mil barrels) the week prior and actually slipped just below the 832 million gallons three weeks ago, which was, at the time, the bottom of the slide in stocks which started in late April. The 25 million gallon decline in stocks last week, combined with the 32 million gallon increase in same-week stocks last year, pushed ethanol stocks to a 174 million gallon (17.3%) decline from last year’s 1.003 billion gallons, the largest year-over-year percentage decline of the recent slide and now the largest weekly decline in stocks relative to the previous year since January 2014. Overall ethanol stocks remain the lowest for early August in five years. This week’s data also reflected the 3rd consecutive week of imports of 7.1 million gallons, with four of the last six weeks now seeing some level of imports after 16 consecutive weeks, from mid-March through late June, seeing no imports.