-Ethanol production slips to 3-week low, but still above “needed” pace
-Ethanol stocks hit 10-week high
U.S. ethanol production, for the week ended 6/11/21, declined to 1.025 million barrels/day (301 million gallons/week) from 1.067 mbpd (314 mil gal/week) the week prior, a 3-week low but still above the roughly 1.003 mbpd average rate we estimate will be needed through the end of August in order for 2020/21 corn for ethanol usage to reach the USDA’s recently-raised 5.050 billion bushel estimate. While this week’s production was 5.2% below 2019 same-week production, below the roughly 4.1% decline from 2019 we estimate is “needed” through the end of August, over the last five weeks ethanol production ran only 3.4% below 2019, on average, more than keeping up with the USDA’s new projection. Relative to last year, as the post COVID-shock recovery remained in full gear, this week’s production was “only” 21.9% above year ago levels, with production last year continuing to recover into mid-July at which time it stabilized well into 2021. With the pullback in ethanol margins of late and stocks recovering to some degree, albeit still historically low, ethanol production rates could begin to become more sensitive to market actions in the weeks ahead. Overall, though, we continue to be comfortable with the USDA’s new corn for ethanol usage estimate at this time.
U.S. ethanol stocks last week rose to a 10-week high of 865 million gallons (20.602 million barrels) from 838 mil gallons (19.960 mil barrels) the week prior, posting a 68 million gallon increase over the last three weeks, and now sitting only 31 million gallons (3.5%) below year ago levels. With stocks last year continuing to decline into mid-July, another solid increase in stocks next week could push above last year for the first time since late January. For reference, 2019 same-week stocks were 908 million gallons. While only rising for a 3-week period so far, the increase in stocks of late is contra-seasonal relative to the pattern of stocks typically declining through at least late June. U.S. gasoline demand posted a solid rebound to 9.360 mbpd from the previous week’s unexpectedly low 8.480 mbpd, reflecting a nearly 19% increase from last year’s 7.870 mbpd but, more importantly, only 5.7% below 2019 same-week demand, with demand over the last six weeks averaging 4.7% below 2019 levels based on the EIA’s weekly data. The combination of lower ethanol production and higher stocks prompted weekly implied ethanol “off-take” to decline to a 6-week low and, a bit concerning, putting the most-recent 4-week average implied off-take 12.4% below same-period levels of 2019.
