-Ethanol production up considerably from previous week
-Ethanol stocks up solidly again
U.S. ethanol production, for the week ended 1/14/22, jumped to 1.053 million barrels/day (310 million gallons/week) from 1.006 mbpd (296 mil gal/week) the week prior, with the 47k bpd (14 mil gal/week) rise being the largest increase in six weeks and pushing production back to 11.4% above last year’s same-week 945k bpd (278 mil gal/week). Over the last four weeks, even with the previous week’s pullback, U.S. ethanol production averaged 11.0% above year ago levels, continuing to run solidly above the roughly 4.6% year-over-year increase we estimate is needed through the end of August following USDA’s upward revision in their 2021/22 corn for ethanol usage estimate to 5.325 billion bushels. Specifically, we estimate ethanol production will need to average roughly 1.013 mbpd from this point forward to reach the USDA’s annual corn demand target vs last year’s 968k bpd average from this point forward.
U.S. ethanol stocks saw another solid increase, rising to 991 million gallons (23.592 million barrels) from 962 mil gal (22.911 mil barrels) the week prior, and followed the previous week’s considerable 65 million gallon (1.552 mil barrel) increase, putting stocks essentially unchanged from year ago levels for the first time in 10 weeks. Impressively, just four weeks ago, ethanol stocks were 119 million gallons (12%) below year ago levels, but are now back to near the highest levels on record on a same-week comparison basis. Additionally, the most-recent 3-week stocks rise of 122 million gallons is the largest for a three week period since April 2020 when stocks surged amid COVID-related shutdowns. The surge in stocks of late puts them at the highest level in 48 weeks going back to mid-February last year. Implied weekly ethanol “off-take” rebounded to 6.690 million barrels from the previous week’s 86-week low of 5.490 million barrels, but the most-recent 4-week average off-take fell to just 1.7% above last year, the lowest year-over-year comparison in 16 weeks and was 3.9% below same-period off-take two years ago. U.S. gasoline demand rebounded modestly last week to 8.224 mbpd from 7.906 mbpd the week prior, but was only 1.4% above year ago demand and was 5.1% below same-week demand two years ago. In fact, the year-over-year increase in gasoline demand was the smallest of the last 43 weeks. With ethanol margins still under pressure, stocks rising sharply of late and gasoline demand gains clearly ebbing, ethanol production will be watched very closely in the weeks ahead for signs of a potential extended period of slowdown.
