-Ethanol production rises again – nearly reaches 2019 levels
-Ethanol stocks post solid bounce, but remain historically low
U.S. ethanol production, for the week ended 5/28/21, rose to 1.034 million barrels/day (304 million gallons/week) from 1.011 mbpd (297 mil gal/week) the week prior, the highest of the post-COVID recovery going back 63 weeks to mid-March 2020 and, even more impressive, only 1.0% below same-week production in 2019. Obviously, ethanol production continues to run sharply above year ago levels for the time being, +35% this week, in COVID-shock comparisons. Over the last four weeks, ethanol production has averaged 4.0% below 2019, continuing to run strongly above the roughly 9.4% decline to 2019 we estimate is “needed” through the end of August based on the USDA’s 4.975 billion bushel annual corn for ethanol usage estimate. Given the strong production pace of late, continued margin structure and historically low stocks, we expect USDA to raise their corn for ethanol usage estimate in next week’s WASDE report. To put some perspective on that, if USDA were to raise their estimate by 25 million bushels to 5.000 billion, ethanol production would still only need to average roughly 7.6% below 2019 levels through the end of August, while a 50 million bushel increase to 5.025 billion would require production running 5.8% below 2019 from this point forward. Accordingly, at least a 25 million bushel increase should be forthcoming, while we’re now 50 million bushels higher than USDA in our balance sheet.
Ethanol stocks posted a respectable rebound last week to 823 million gallons (19.588 million barrels) from 797 million gallons (18.980 mil barrels) the week prior, with the 26 million gallon rise being the 2nd largest of the last 17 weeks, but stocks still remain nearly 13% (121 million gallons) below year ago levels and easily remain the lowest on a same-week basis since 2014. Implied weekly ethanol “off-take” slipped to 6.630 mbpd last week from 7.530 mbpd the week prior, but impressively, implied off-take over the last four weeks averaged less than 1% below same-period 2019 levels. U.S. gasoline demand last week slipped to 9.146 mbpd from 9.479 mbpd the week prior, and was 3.1% below 2019 (+21.2% vs last year), and has averaged 2.0% below 2019 over the most-recent four weeks.
