Ethanol groups again call for E12 decision
Three ethanol groups last week again called on the EPA to raise the maximum ethanol mix to 12% (E12) from the current 10% (see news digest links in full PDF report here). The groups are concerned that the EPA in September may approve E15 only for newer vehicle models, which would likely cause big distribution problems since most fuel stations cannot carry multiple ethanol blends. The groups would rather have a single limit of E12 for all engines than E15 for new engines and E10 for older engines.
Ethanol production matches record in May
Last week’s monthly EIA ethanol data indicated that production in May climbed 1.8% m/m to 847,000 barrels per day, thus matching the record high posted in March. However, the more recent weekly data for the week ended July 23 indicated production at 816,000 bpd, which was 3.7% below the record high and was a bit more palatable for ethanol prices. Ethanol inventories in May rose to a record high of 19.721 million barrels, although the more recent weekly data indicated inventories 1.0% lower at 19.523 million barrels. On the bullish side, the U.S. ethanol industry in May was operating at 96.0% of capacity, meaning there is not much room to further boost U.S. ethanol production. However, the market remains concern about a possible bulge in inventories when the summer driving season ends.
Ethanol Market Action - September CBOT Ethanol futures prices last week extended the 5-week rally to post a new 2½-month high and close up 6.4 cents (+4.0%) at $1.666 per gallon. Ethanol prices were boosted last week by the sharp 5.8% rally in corn prices and by continued technical buying with the new 2½- month high. The EIA ethanol reports contained no surprises and had little net impact.
Ethanol/Gasoline – September gasoline futures prices last week consolidated below the recent 7-week high, finally closing slightly higher by 0.32 cents (+0.2%) at $2.1224 per gallon. Gasoline prices were supported mainly by commodity strength driven by the 1.1% sell-off in the dollar index. The spread of September ethanol prices minus gasoline prices last week rose by 6.1 cents to -$45.6 cents.
Ethanol/Corn – Sep corn futures prices last week recovered most of the losses seen in the previous week and closed +21.50 cents (+5.8%) at $3.9275 per bushel. Bullish factors included (1) forecasts for hot weather in key U.S. growing areas in the next 2 weeks, (2) continued hot, dry weather in Russia and Europe, which is causing substantial damage to crops and should boost demand for U.S. corn exports, and (3) the 1.1% sell-off seen in the dollar index last week.
The Sep ethanol-corn crush margin last week fell by 1.3 cents to 26.3 cents/gallon, which was mildly above the recent 13-month low of 20.1 cents per gallon. Including DDG, the Sep corn for ethanol crush margin rose by 5.1 cents to 60.2 cents/gallon thanks to a sharp 23% increase in Sep DDG prices to $106.90 from $86.90 per ton.
- Aug 4: EIA Weekly Petroleum Status Report
- Aug 12: USDA WASDE Crop Supply-Demand
- Aug 30: EIA June Monthly Ethanol Report
- September: EPA’s E15 decision due
Disclosure: No positions