The ethanol market this week will focus on:
- the corn market ahead of Monday’s USDA weekly Crop Progress report and Wednesday’s USDA Acreage and Grain Stocks reports,
- gasoline prices, which are focused on any disruptions caused by Tropical Storm Alex, and
- Tuesday’s EIA monthly ethanol report and Wednesday’s EIA Weekly Petroleum Status Report.
Weekly ethanol data - The EIA reported last Wednesday that U.S. ethanol inventories in the week ended June 18 rose fairly sharply by 4.4% to 19.368 million barrels (813 million gallons) from the previous week’s figure of 18.551 million barrels (779 million gallons). Meanwhile, ethanol production in the week ended June 18 rose by +0.8% w/w to 846 million barrels/day, which was just slightly below the record level of 847 million bpd seen in March. The rise in production and inventories in the latest week helped push ethanol prices lower last week as the market struggles to absorb continued near-record levels of production. Now that the markets have weekly ethanol data, this Tuesday’s monthly ethanol report for April will be relatively stale. In March, U.S. ethanol production hit a record high of 1.103 billion gallons, which was up 32.4% y/y.
July CBOT Ethanol futures prices last week fell sharply to post a new 11-month low and close 8.8 cents lower (-5.4%) at $1.536 per gallon. The main bearish factor was record U.S. ethanol production combined with the difficulty of expanding demand with the EPA’s recent announcement that it is delaying its E15 decision for newer vehicles until September. Gasoline prices rallied sharply last Friday but that didn’t help ethanol prices since the gasoline rally was due to an approaching storm in the Gulf of Mexico that will not affect the land-based ethanol market. Ethanol prices last week were also undercut by (1) the sharp 5.6% sell-off in corn prices, and (2) the 33% plunge in new home sales, which raised further doubts about the US economy and consumer fuel demand.
Ethanol/Gasoline – July gasoline futures prices faded last week but then rallied sharply on Friday on concern about tropical storm Alex, finally closing the week up 2.02 cents (+0.9%) at $2.1678 per gallon. Except for the concern about the storm, sentiment in the gasoline market was generally bearish with weak U.S. economic data and with gasoline inventories still 3.9% above the 5-year seasonal average. With the weakness in ethanol prices versus the strength in gasoline prices, the spread of July ethanol prices minus gasoline prices last week fell sharply by 10.8 cents to -63.2 cents per gallon, which was mildly above the recent 1-3/4 year low of -77.0 cents.
Ethanol/Corn – July corn futures prices last week fell sharply back toward the recent 9-month low and closed the week down 20.25 cents (-5.6%) at $3.4050 per bushel. The corn market sank last week on forecasts for cooler and drier weather and the likelihood that U.S. farmers this summer will produce a record-sized crop. The U.S. corn crop remains in 75% good-to-excellent condition, above last year’s 70% and the highest level in at least 5 years. The July ethanol-corn crush margin last week fell by 1.6 cents to 32.0 cents per gallon, mildly above the recent 1-year low of 25.1 cents. Including DDG, the corn for ethanol crush margin fell by 1.6 cents to 61.2 cents per gallon.
- June 29: EIA Monthly Ethanol Report
- June 30: EIA Weekly Petroleum Status Report
- June 30: USDA Acreage, USDA Grain Stocks
- July 19: USDA WASDE Crop Supply-Demand
- September: EPA’s E15 decision due
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