-Ethanol production dips, but maintains “needed” pace
-Ethanol stocks further decline, but marginally
U.S. ethanol production, for the week ended 4/09/21, declined to 941k barrels/day (277 million gallons/week) from 975k bpd (287 mil gal/week), which was largely anticipated based on plant maintenance downtime, but was a massive 65% higher than last year’s same-week production of 570k bpd (168 mil gal/week), the 2nd week of the massive COVID-shock downturn. More importantly, though, even with the decline to the 3-week low, last week’s production was still only 7.4% below the same week two years ago vs the roughly 8.1% average decline vs April-August 2018/19 production we estimate can occur and still reach the USDA’s 4.975 billion bushel corn for ethanol usage estimate. Temporarily, we have added another chart below to show the difference between this year’s ethanol production and same-week production in 2018/19, along with the calculated “needed” production relative to remaining 2018/19 production, as well, as direct comparisons to last year’s situation are invalid given the COVID implications. As seen in the 4th chart below, ethanol production has been running mostly 3-7% below same-week 2018/19 levels over the last six weeks, better than the roughly 8% decline which could occur and still reach the USDA’s current corn demand target. With ethanol margins remaining positive, seasonal demand increasing and ethanol stocks historically low, we fully anticipate ethanol production continuing to run at respectable levels and, most likely, above the “needed” pace as we head into the summer driving season.
U.S. ethanol stocks last week ticked down to 862 million gallons (20.518 million barrels) from 867 million gallons (20.642 mil barrels) the week prior, the 7th decline in stocks over the last 8 weeks and are now 25% (292 million gallons) below last year’s soaring COVID-period stocks of 1.154 billion gallons. More importantly, ethanol stocks remain the lowest for mid-April since 2014. U.S. gasoline demand rose to a 33-week high last week of 8.944 mbpd from 8.791 mpbd the week prior, 76% higher than last year’s COVID-low of 5.081 mbpd, and only 5.1% below 2019’s same-week demand of 9.420 mbpd. Over the last four weeks, gasoline demand has averaged 5.9% below 2019 levels. We continue to feel the risk bias to the USDA’s 2020/21 U.S. corn for ethanol usage estimate remains to the upside.
