-Ethanol production mostly steady last week
-Ethanol stocks decline continues – down solidly to 26-week low
U.S. ethanol production, for the week ended 4/23/21, ticked higher to 945k barrels/day (278 million gallons/week) from 941k bpd (277 mil gal/week) the week prior and was 76.0% larger than last year’s COVID-shock low of the year of 537k bpd (158 mil gal/week). More importantly, production was 7.7% below same-week production in 2019, which was right in line with the 7.9% average decline relative to 2019 production we estimate is needed through the end of August in order to reach the USDA’s 4.975 billion bushel corn for ethanol usage estimate. However, the seasonal uptick in ethanol production has not started yet, as was seen in 2019, with production in recent weeks being rather flat, resulting in average production over the last three weeks averaging 8.4% below 2019 levels vs the 3.7% average decline to 2019 experienced in March. Accordingly, ethanol production will need to begin moving higher from recent-week levels to maintain the USDA’s annual corn for ethanol usage target as we see production needing to average roughly 968k bpd (285 mil gal/week) through the end of August vs the last three weeks’ production averaging 942k bpd (277 mil gal/week). For reference, ethanol production averaged 1.052 million bpd through the end of August in 2019.
While ethanol production last week was mostly steady, stocks posted the largest decline in six weeks, falling to 829 million gallons (19.736 mil barrels) from 859 mil gallons (20.447 mil barrels) the week prior, the lowest in 26 weeks and the lowest on a same-week basis since 2014. Even though ethanol stocks last year began declining from the previous week’s COVID-shock high, current stocks are still 277 million gallons (25.1%) below year ago levels. The combination of steady production and declining stocks implied weekly ethanol “off-take” at a 4-week high of 7.326 mbpd vs 6.658 mbpd the week prior and put the most-recent 4-week average down 6.5% from the same period in 2019, a bit stronger than the recent 8.4% average production decline relative to 2019 levels. Accordingly, with demand remaining solid and ethanol margins still in the green, while ethanol stocks continue to decline, there appears to be plenty of incentive for ethanol production to continue running strong enough to at least meet the USDA’s corn demand estimate, if not exceed it. U.S. gasoline demand last week declined slightly, but was a 3-week low, at 8.877 mbpd vs 9.104 mpd the week prior, 52% stronger than last year’s COVID-weak demand, but only 3.8% below 2019 same-week demand of 9.228 mbpd. Over the last three weeks, gasoline demand has averaged 4.0% below 2019 levels.
