-Ethanol production sees first decline in 12 weeks
-Ethanol stocks decline resumes – now lowest since end 2016
U.S. ethanol production, in the week ended 7/17/20, posted the first decline in 12 weeks, falling to 908k barrels/day (267 million gallons/week) from 931k bpd (274 mil gal/week) the week prior, reversing what has been a very respectable continual rebound from the COVID-19 low of 537k bpd (158 mil gal/week) low in the week ended 4/24/20. Despite the outright production decline, though, the year-over-year reduction held steady again at 12.6% (previous two weeks were both 12.7% declines) as last year’s ethanol production this week also saw a decline to 1.039 million bpd (305 mil gal/week). While the production deficit to last year holding steady is nice to see, the fact remains U.S. ethanol production continues to run substantially below the pace needed in order to prevent another decline in the USDA’s 4.850 billion bushel estimate for the 2019/20 corn marketing year. In fact, we estimate ethanol production would need to average roughly 998k bpd over the final six weeks of 2019/20 to reach the USDA’s corn demand estimate, roughly 10% higher than this week’s production, 8.7% larger than the most-recent 3-week average and a level not reached in 17 weeks. Obviously, another reduction in the USDA’s annual corn for ethanol usage estimate appears necessary. We estimate roughly 89 million bushels of corn was used for ethanol production last week, 12 million bushels less than the same week last year, bringing the 2019/20 estimated total demand reduction from last year to 500 million bushels vs the USDA’s currently-estimated 528 million bushel annual decline. If ethanol production averages an 11% year-over-year decline through the end of August, the USDA’s current estimate will be around 50 million bushels too high.
U.S. gasoline demand last week also saw a downturn, falling to 8.550 mbpd from 8.648 mbpd the week prior and was the lowest in five weeks. Was this an early indication of a potential resumption of weaker gasoline demand levels forthcoming given the resurgence in coronavirus cases across the south? The year-over-year decline in gasoline demand last week rose to 11.6% from the 6.1% deficit the week prior and the most-recent 4-week average decline of 8.8%. Calendar year-to-date gasoline demand is now down 14.9% from last year based in the EIA’s weekly data.
U.S. ethanol stocks saw a larger-than-expected decline to 832 million gallons (19.801 mil barrels) from 866 mil gallons (20.608 mil barrels) the week prior and followed apparently a temporary rebound in stocks the previous two weeks after a continual decline from mid-April through late June. Not only was last week’s stocks decline the 2nd largest of the last 10 weeks, but it resulted in U.S. ethanol stocks declining to the lowest level since the end of December 2016. Despite the resumed decline in stocks, ethanol margins have notably deteriorated of late, not boding well for a rebound in production rates for the time being.
