Ethanol Production in the US Records Weekly Decrease to 1.04 Million Barrels Per Day, Stocks Decline by 3%

In the week ending on August 18, the United States observed a notable decrease in its weekly ethanol production, with figures dropping to 1.04 million barrels per day (b/d), as reported by the US Energy Information Administration (EIA). This unexpected decline occurred despite the apparent health of ethanol production margins and resulted in a substantial reduction in ethanol stocks, which experienced a nearly 3% decrease compared to the previous week.

The total ethanol production across the country witnessed a decline of 21,000 b/d during the reporting week. Specifically, ethanol output in the Midwest region, which hosts the majority of the nation's ethanol production capacity, saw a decrease of 20,000 b/d, settling at 992,000 b/d, according to data provided by the EIA.

Throughout the week, the total production volume translated to the consumption of 2.7 million metric tons (mt) of corn. This represented a decrease from the 2.75 million mt recorded in the preceding week.

Concurrently, the stock of ethanol observed a reduction of 645,000 barrels, reaching a level of 22.8 million barrels during the period under review. This marked the lowest point in six weeks for ethanol stocks.

A model designed by Iowa State University, which gauges margins, indicated that the estimated return over operating costs for an average plant located in the Midwest region saw a modest increase of 0.05 cents per gallon, bringing it to a total of $0.50 per gallon by the week ending August 18.

In parallel, the prices of corn experienced an upward trend, rising by $0.06 per bushel over the course of the week, ultimately averaging at $5.60 per bushel.

In terms of finished ethanol prices, the data highlighted an increment of 0.08 cents per gallon, culminating in a value of $2.195 per gallon.

The combination of these factors paints a nuanced picture of the US ethanol market for the specified week. Despite the seemingly favorable production margins, the decline in weekly ethanol production and subsequent decrease in stocks implies underlying complexities at play. The Midwest, as a central hub for ethanol production, experienced a substantial reduction in output, potentially influenced by various factors, including market demand, supply chain dynamics, and agricultural trends.

The reduction in ethanol stocks, reaching a six-week low, could indicate a shift in market conditions or temporary disruptions in the supply chain. The interplay between ethanol production, corn prices, and finished ethanol prices underscores the intricate balance within this sector. The increment in finished ethanol prices might reflect a response to supply-demand dynamics or external economic influences.

As the ethanol industry remains subject to a multitude of variables—ranging from crop yields and market demand to regulatory policies and geopolitical events—monitoring these fluctuations and their ripple effects becomes essential for both industry insiders and external observers seeking to grasp the intricate mechanisms driving this pivotal sector of the US economy.