-Ethanol production gutting continues – record low weekly rate
-Ethanol stocks surge continues
U.S. ethanol production, for the week ended 4/03/20, plunged again to a new all-time low of 672k barrels/day (198 million gallons/week) from 840k bpd (247 million gallons/week) the previous week and was a massive 32.9% below last year’s same-week production of 1.002 million bpd (295 mil gal/week). The previous record low production since EIA began providing weekly data in June 2010 was 770k bpd (226 mil gal/week) in the week of 01/25/2013. This week’s ethanol production implied just 67 million bushels of corn was used, 33 million bushels less than the same week last year, with the last two week year-over-year corn usage reduction of 49 million bushels. So far for the 2019/20 marketing year, we estimate total corn used for ethanol production is now down 31 million bushels as all of the gains made during November-March have been erased. The USDA’s 5.425 billion bushel annual corn for ethanol usage estimate reflects a 47 million bushel increase from 201819 and will obviously be revised lower in tomorrow’s WASDE report. The only question is by how much. For reference, a 25% reduction in ethanol production through the end of June would imply a total corn demand reduction from last year of around 350 million bushels, justifying an annual estimate below 5.000 billion bushels – 425 million below the USDA’s current estimate. At this time, there is simply no way to know how long and how severe production cuts will continue and if/when a rebound will be seen. It is clear, though, USDA should make a rather large cut in their corn for ethanol usage estimate tomorrow, prompting an increase in ending stocks possibly by a considerable amount. We’re currently using 5.100 billion bushels for our corn for ethanol usage estimate, hopeful a recovery will begin before the end of the 2019/20 marketing year. This week’s ethanol production implied an annualized rate of just 10.3 billion gallons vs peak weekly production this year running at an annualized rate of 16.8 billion gallons.
The U.S. gasoline demand plummet continues with last week’s demand of 5.065 mbpd down 48% from last year’s 9.806 mbpd and implying an annualized gasoline demand rate of just 78 billion gallons vs 2019 demand of roughly 143 billion gallons.
Even with the massive production pullback, U.S. ethanol stocks continue to surge, hitting another new record last week of 1.138 billion gallons (27.091 million barrels), jumping 58 million gallons from the previous week and now reflecting a 164 million gallon (17%) increase in stocks from this point last year. U.S. ethanol stocks are approaching 10% of total annual domestic demand even in the best of times and currently reflect more than 40 days of ethanol production at this week’s level.
