-Ethanol production ticks slightly higher
-Ethanol stocks surge continues with another huge increase
-Stocks highest since April 2020
U.S. ethanol production, for the week ended 1/28/22, rose slightly to 1.041 million barrels/day (306 million gallons/week) from 1.035 mbpd (304 mil gal/week) the week prior and continues to run at a rather solid pace relative to last year, being 11.2% above year ago same-week production of 936k bpd (275 mil gal/week), which was right in line with the 11.0% average year-over-year increase during the most-recent six-week period. Impressively, despite production margins declining sharply in recent weeks and back into negative territory in many/most cases, ethanol production rates have held very steady, averaging 1.042 mbpd over the last seven weeks (1.043 mbpd average over last three weeks), but we have to expect production beginning to slow in the near future as stocks continue to surge higher. For now, production continues to run well above the roughly 4.0% year-over-year increase we estimate is needed through the end of August for 2021/22 corn for ethanol usage to reach the USDA’s 5.325 billion bushels, but again, current dynamics do not support production continuing at recent rates.
The larger focus on the ethanol situation is the continued significantly rising stocks picture, posting another huge 58 million gallon increase this week to 1.086 billion gallons (25.854 million barrels) from 1.028 billion gallons (24.476 mil barrels) the week prior and bringing the total increase over the last five weeks to a massive 217 million gallons, a 25% increase from levels in late December. Current stocks are easily record high for late January and are quickly approaching all-time record weekly stocks, since the EIA began reporting weekly data in June 2010, of 1.163 billion gallons. Moreover, current stocks are now 6.3% (65 million gallons) above year ago levels, the largest year-over-year percentage increase in 24 weeks. With the stocks gain sharply outpacing the increase in production, implied weekly ethanol off-take (last week’s stocks + this week’s production – this week’s stocks) fell to 5.909 million barrels from 6.361 million the week prior and was the 2nd lowest of the last 28 weeks. More importantly, the most-recent 4-week average implied off-take of 6.113 million barrels was the lowest in 85 weeks, since mid-June 2020, and was the lowest for the 4-week period ended late January since 2014. U.S. gasoline demand slipped last week to 8.226 mbpd from 8.505 mbpd the week prior and was 5.9% above year ago levels, while gasoline demand has averaged +5.2% year-over-year during the last four weeks. Given the modest increase in gasoline demand of late, the sharp increase in ethanol stocks and continued decline in implied off-take, it is clear U.S. ethanol production rates continue to run higher than necessary – for now.
