-Ethanol production slips in latest week
-Ethanol stocks surge continues – returns to same-week record
-First ethanol imports reported in 10 weeks
It was more of the same this week ethanol production slipping a bit from the previous week, but more than maintaining the average “needed” pace to reach the USDA’s corn for ethanol demand estimate, while stocks continue to surge higher.
U.S. ethanol production, for the week ended 1/21/22, slipped to 1.035 million barrels/day (304 million gallons/week) from 1.053 mbpd (310 mil gallons/week) the week prior, reflecting a nearly 11% increase from year ago same-week production of 933k bpd (274 mil gal/week). While production has declined modestly in recent weeks, the overall pace continues to easily exceed the roughly 1.012 mbpd average we estimate is needed through the end of August to reach the USDA’s 5.325 billion bushel corn for ethanol usage estimate. Specifically, ethanol production over the most-recent 4-week period averaged 1.036 mbpd, 2.4% above the “needed” pace and 10.3% above year ago levels, but actually 2.2% below same-period production production two years ago. The production comparisons largely match the gasoline demand situation, as gas demand over the last four weeks averaged 6.2% above year ago levels, but 3.9% below 2020 levels. U.S. gasoline demand last week ticked up to 8.505 million barrels from 8.224 million the week prior, up 8.6% from last year but 3.3% below demand in 2020.
Despite the decline in production, U.S. ethanol stocks continue to surge, jumping another 37 million gallons last week to 1.028 billion (24.476 million barrels) from 991 million gallons (23.592 mil barrels) the week prior and have quickly returned to record levels on a same-week basis in exceeding 2020’s 1.018 billion gallons this week. Over the last four weeks, ethanol stocks have risen 160 million gallons, reflecting a 15.5% increase in total stocks during the period, while also being the largest 4-week increase on record since EIA began reporting weekly data in June 2010. Additionally, ethanol stocks are now 37 million gallons (3.7%) above year ago level, marking the return to a year-over-year stocks increase for the first time in 10 weeks and are the highest in 90 weeks, back to early May 2020. For reference, ethanol stocks are still moderately below all-time record stocks of 1.163 billion gallons, though. Implied weekly ethanol “off-take” (last week’s stocks + this week’s production – this week’s stocks) slipped to 6.361 million barrels from 6.690 million the week prior, while the most-recent 4-week average off-take declined to a 3.8% deficit relative to last year, the first year-over-year deficit in 4-week implied off-take in 44 weeks going back to March 2021, while being 4.7% below off-take levels two years ago, the 4th consecutive week of shortfalls relative to 2020. On a final note, this week’s data reflected the first ethanol imports in 13 weeks (a modest 10.6 million gallons) and only the 2nd week of imports of the last 18 weeks.
The historic surge in ethanol stocks, combined with return of ethanol production margins to near/below breakeven levels, threatens the continuation of production rates near current levels, increasing the risk/likelihood of slowing production in weeks/months ahead.
