The ethanol market this week will focus on:
- the corn market ahead of Monday’s USDA weekly Crop Progress report,
- gasoline prices, which continued higher last week as sentiment improved on the economy and fuel demand,
- Wednesday’s EIA Weekly Petroleum Status Report, which now contains ethanol data on a weekly basis.
EPA announces delay in E15 decision and could be moving to tiered ceiling--The EPA last week announced
that it is delaying its decision on whether to allow ethanol blends up to 15% (E15) from the current 10%
until September in order to allow more time for testing on vehicles of 2007 and newer. The EPA appears
willing to approve E15 for model years 2007 and newer. However, the EPA said it will not decide on
engines older than 2007 until later in the year. This poses a serious problem because gasoline stations
are not equipped to sell multiple blends of ethanol/gasoline, allowing vehicle owners to choose between
various blends depending on their model year. The ethanol industry wants a single limit for all
engines, thus avoiding the multiple blend problem. The ethanol market was able to shake off the
negative EPA news, which eliminated hopes that the EPA might adopt an across-the-board E12 limit as soon
as this month.
Weekly ethanol data - The EIA reported last Wednesday that U.S. ethanol inventories in the week ended
June 11 were 18.551 million barrels (779 million gallons). That was up 1.3% w/w, but was down 5.8% from
March, indicating that inventories are not burdensome. Ethanol production was unchanged w/w at 839
million bpd, down slightly by 0.9% from March’s record level of 847 million bpd.
Ethanol prices extend upward rebound--July CBOT Ethanol futures prices last week extended the upward
rebound from the recent 9-month low to post a new 5-week high and close 3.8 cents higher (+2.4%) at
$1.624 per gallon. Bullish factors included (1) increased optimism about the US economy and fuel demand
with the rally in the stock market, (2) the 4.8% rally in gasoline prices and 3.2% rally in corn prices,
and (3) the 2.2% sell-off in the dollar index.
Ethanol/Gasoline – July gasoline futures prices last Tuesday posted a new 5-week high but then faded
later in the week to close up 9.79 cents (+4.8%) at $2.1476 per gallon. Bullish factors included (1) the
rally in the stock market, which boosted optimism about the economy and fuel demand, and (2) Wednesday’s
news that U.S. gasoline demand in the week ended June 11 climbed to a 9-1/2 month high. The spread of
July ethanol prices minus gasoline prices last week fell by 6.0 cents to -52.4 cents per gallon, which
was well above the recent 1-3/4 year low of -77.0 cents.
Ethanol/Corn – July corn futures prices last week extended the 2-week rally rebound to post a new 3-week
high and close 11.25 cents higher (+3.2%) at $3.6075 per bushel. Bullish factors last week included
technical short-covering and increased optimism about demand after the US Grains Council forecasted that
China may purchase in excess of 1 million metric tons of U.S. corn in the next 18 months. The July
ethanol-corn crush margin last week fell by 0.2 cents to 33.6 cents per gallon, mildly above the recent
1-year low of 25.1 cents. Including DDG, the corn for ethanol crush margin fell by 0.2 cents to 62.7
cents per gallon.
- June 23: EIA Weekly Petroleum Status Report
- June 29: EIA Monthly Ethanol Report
- July 19: USDA WASDE Crop Supply-Demand
- September: EPA’s E15 decision due
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