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-Ethanol production slips to 5-week low but remains above “needed” pace
-Ethanol stocks surge to 21-week high

U.S. ethanol production, for the week ended 7/16/21, fell to 1.028 million barrels/day (302 million gallons/week) from 1.041 mbpd (306 mil gal/week) the week prior, the lowest in five weeks and was 13.2% above last year’s same-week production but, more importantly, only 1.1% below 2019 same-week production, continuing to run above the roughly 3.8% decline relative to 2019 we estimate is needed in order to reach the USDA’s 2020/21 corn for ethanol usage estimate of 5.050 billion bushels. Over the last five weeks, ethanol production has averaged only 1.2% below 2019 levels, at an average of 1.048 mbpd vs the roughly 992k bpd we estimate production could run through the end of August and still reach the USDA’s annual demand target. With ethanol margins remaining under pressure and the sudden resurgence in stocks, a close eye will be kept on further potential production declines in the weeks ahead, but for now, the USDA’s corn demand estimate remains on target.

U.S. ethanol stocks posted the largest increase in 68 weeks, jumping by 58 million gallons to 946 million (22.518 mil barrels) from 888 million gallons (21.134 mil barrels) the week prior, surging to 114 million gallons (13.7%) above year ago levels and, impressively, reflecting the 2nd highest stocks on a same-week basis on record since EIA began reporting weekly data in 2010 as stocks are typically seasonally declining through the end of August vs this year’s near continual increase since mid-May. Just five weeks ago, ethanol stocks were the lowest on same-week basis since 2014. Gasoline demand last week was steady at 9.295 mbpd vs 9.283 mbpd the week prior, still running solidly above last year’s 8.550 mbpd and was 3.9% below 2019 same-week demand. Over the last five weeks, gasoline demand has averaged a mere 0.8% below 2019 levels. With the surge in stocks, weekly implied ethanol “off-take” fell to a 60-week low of 5.812 mbpd vs 7.302 mbpd the week prior and the 7.242 mbpd average over the most-recent four weeks. Sometimes aberrations in stocks data are seen so we’ll be on the lookout next week. Nonetheless, over the last four weeks, implied ethanol off-take still ran at an average of 1.6% above 2019 levels.

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