Ethanol Demand Focuses Attention on US Corn

Travel restrictions led to sharp drops in ethanol demand last year, which helped balance surging global feed demand. 

As more Americans get vaccinated and COVID-19 restraints ease, the rise in US automobile miles driven is expected to increase, significantly increasing demand for gasoline and ethanol produced from corn, turning the screws on a corn market that is already tight.

In the most recent 4-week period (ending May 15), US gasoline demand was up 34% from last year, increasing from 6.68 million barrels per day (bpd) to 8.94 million bpd. Since 35% of the US corn crop goes to making ethanol, higher demand for the fuel additive increases demand for corn. 

US ethanol production of 1.032 million bpd has increased 92% since the low of 537,000 bpd in late April 2020. In the latest week, inventory held steady at 19.4 million barrels, but remains the lowest in 5 years, amid continued strength in blending demand. Prices for renewable fuel credits are also rising, indicating that refiners are having difficulty finding product to blend. 

Gro’s 2020/21 in-season forecast of corn used for ethanol  is 5.103 billion bushels, 128 million bushels greater than the USDA’s projection in the May WASDE. Gro has long suggested that the USDA is too light on their overall corn demand projections, and consequently is overestimating carryout for 2020/21. 

A sharp rise in prices has led the market to expect farmers to plant additional acres, but the uptick in ethanol demand, coupled with record new crop corn purchases by China over the past couple of weeks, could fully offset any additional supply. 

At this point, demand levels are such that carryout will be lower unless yield is significantly above trend. Gro’s in-season Corn Yield Forecast Model, which updates daily and provides a reading across the county, state, and national level, can be a useful tool for forecasting US supply. 

This insight was powered by the Gro platform, which enables better and faster decisions about factors affecting the entire global agricultural ecosystem. Gro organizes over 40,000 datasets from sources around the world into a unified ontology, which allows users to derive valuable insights such as this one. You can explore the data available on Gro with a free account, or please get in touch if you would like to learn more about a specific crop, region, or business issue.