-Ethanol production hits 15-week high
-Ethanol stocks hit 20-week low
-Gasoline demand holds steady
The story remains the same as U.S. ethanol production continues its modest, but steady rebound, while ethanol stocks continue to decline.
U.S. ethanol production, for the week ended 4/02/21, hit a 15-week high of 975k barrels/day (287 million gallons/week), rising from the previous week’s 965k bpd (284 mil gal/week) and reflecting a massive 45% increase from last year’s same-week COVID-impacted 672k bpd (198 mil gal/week). More importantly, ethanol production has run above the roughly 952k bpd (280 mil gal/week) average we estimate is needed through the end of August to reach the USDA’s 4.950 billion bushel corn for ethanol usage estimate in three of the last four weeks. With ethanol margins remaining in the black and stocks continuing to decline, we see no reason for production to slow anytime soon, particularly heading into the summer driving season with the nation’s rising vaccination rates and rising encouragement to get back to some sort of normalcy likely supporting gasoline demand in the months ahead. With the comparison to last year no longer valid given the COVID-shock impact, we continue to watch ethanol production/demand numbers relative to 2018/19 as a better proxy. Impressively, ethanol production has averaged only 3.7% below 2019 levels over the last four weeks, while our average “needed” production rate based on the USDA’s current corn demand target would reflect ethanol production through the end of August down more than 9% from 2019. Clearly ethanol production has been running stronger than the “needed” pace of late, with any seasonal increase in the months ahead likely to only support prospects for USDA to raise their corn for ethanol usage estimate at some point. We’re currently 50 million bushels higher than USDA in our balance sheet.
Despite the increase in production, U.S. ethanol stocks fell to a 20-week low last week of 867 million gallons (20.642 million barrels) from 887 million gallons (21.114 mil barrels) the week prior and reflected a 24% (271 million gallon) decline from year ago stocks this week, which surged higher given the COVID situation. Seasonally, ethanol stocks have a strong tendency to continue declining through June-July and we see little to alter that expectation this year heading into the summer months. In the big picture, ethanol stocks are the lowest for early April since 2015. U.S. gasoline demand held mostly steady last week at 8.781 million bpd vs 8.891 mbpd the week prior, 73% higher than last year’s COVID-impacted 5.065 mbpd, but nearly 11% less than 2019’s same-week demand of 9.806 mbpd, which was atypically high. Over the last four weeks, gasoline demand has averaged 6.7% below the same period in 2019. U.S. ethanol implied “off-take” last week (previous week’s stocks + this week’s production – this week’s stocks) of 7.297 mbpd was little-changed from the previous week’s 7.450 mbpd, while the most-recent 4-week average off-take was up 28% from last year, but more importantly, down less than 1% from the same 4-week period in 2019.