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EIA's new weekly ethanol report is bullish; Weekly CRB/CME Group Weekly Ethanol Outlook Report

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The ethanol market this week will focus on:
- the corn market ahead of Monday’s USDA weekly Crop Progress report,
- gasoline prices, which showed a modest recovery rally last week, and
- Wednesday’s EIA Weekly Petroleum Status Report, which now contains ethanol data on a weekly basis.

EIA starts releasing weekly ethanol data - The Energy Information Administration last Wednesday started releasing ethanol production, inventory and import data on a weekly basis in its widely-followed EIA Weekly Petroleum Status Report.  The weekly production figures will allow the marketplace to gain a quicker sense of the ethanol supply/demand balance versus the current 2-month lag in the monthly reports.  The EIA reported that ethanol inventories in the week ended June 4 were at 18.3 million barrels (769 million gallons), which was bullish news since that was down by 7.0% from the March level of 827 million gallons.  That indicates that ethanol inventories are still not burdensome despite strong production.  The EIA reported production at 839 million bpd, which is down slightly by 0.9% from March’s record level of 847 million bpd.

USDA tightens up corn outlook - The USDA last week in its monthly WASDE report cut its 2010/11 corn carry-over estimate to a 4-year low of 1.603 billion bushels.  The downward revision was mainly due to the USDA’s hike in its 2010/11 corn for ethanol usage estimate by 3.4% from the previous month’s estimate to 4.55 billion bushels (+24% y/y).  The USDA report highlighted the strong demand situation for corn.  However, there will still be plenty of corn to go around after this summer’s harvest given the very favorable start to the growing season.  Thus, corn prices should remain under wraps and US ethanol producers should see continued favorable profit conditions.

July CBOT Ethanol futures prices last Wednesday posted a new 9-month low but then showed a mild recovery to close 1.6 cents higher (+1.0%) at $1.586 per gallon.  Bullish factors included the 2.8% rally in corn prices, the 2.7% rally in gasoline prices, and the mildly bullish EIA weekly ethanol report.

Ethanol/Gasoline – July gasoline futures prices last week closed mildly higher by 5.44 cents (+2.7%) at $2.0497 per gallon.  Crude oil prices fell last Friday on the weak U.S. retail sales report of -1.2%.  However, crude oil found support during the week from (1) the IEA’s hike in its 2010 global oil demand forecast by 1.7 mln bpd to a record 86.4 mln bpd,  and (2) news that oil drilling in the Gulf of Mexico fell 50% last week to the lowest level in 16 years due to the fall-out from the BP oil spill.  The spread of July ethanol prices minus gasoline prices last week fell by 3.8 cents to -46.4 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 rebounded higher from a 9-month low and closed the week up 9.50 cents (+2.8%) at $3.4950 per bushel.  Bullish factors last week included technical short-covering, the USDA’s cut in its 2010/11 carry-over estimate, and continued hopes for strong Chinese corn buying.  The July ethanol-corn crush margin last week fell by 1.8 cents to 33.8 cents per gallon, mildly above the recent 1-year low of 25.1 cents.  Including DDG, the corn for ethanol crush margin fell by 4.6 cents to 62.5 cents per gallon.

Ethanol Calendar
- June 16: EIA Weekly Petroleum Status Report
- June 29: EIA Monthly Ethanol Report
- July 19: USDA WASDE Crop Supply-Demand
- Summer: EPA’s E15 decision due

Read the full PDF report with ethanol news digest and graphics at

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