US Market Awash in Ethanol

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US ethanol prices tumbled to 13-year lows this week, pressured by rising stocks and production forecasts. Ethanol stocks sit at 22.93 million barrels as of Nov. 23 and are selling at $1.15 per gallon. Nearly 40 percent of corn produced in the United States is allotted to ethanol production annually, and recent developments in the industry indicate that the US can expect even greater volumes of ethanol over the next few years. Last month, the Trump administration announced year-round availability of higher ethanol content E-15 gasoline. Sale of E-15 during the summer months was previously prohibited by the USDA because it is believed to contribute more significantly to smog than E-10 blends.

Foreign customers aren’t buying ethanol from the US. Brazilian imports of ethanol fell to a three-year low amid high domestic supplies of sugarcane-derived bioethanol and 20-percent import duties on US corn-ethanol. China has spurned US corn-ethanol as well with tariffs of its own, despite the country’s plans to roll out ethanol-blended gasoline for motor-vehicle use nationwide. On top of this, the Trump administration is now waiving requirements for select oil refineries to meet the EPA’s mandated biofuel-blending quotas, which puts US ethanol producers in an even tougher situation. News on one front—the US-China trade dispute—may come this weekend, when President Trump is expected to meet with Chinese President Xi Jinping at the G-20 summit. Gro Intelligence subscribers can easily track data on US ethanol markets, supply, and trade.

The chart on the left shows weekly changes in US fuel ethanol stocks (green line) measured in barrels as well as weekly production of fuel ethanol measured in barrels per day (blue line). The chart on the right compares annual total corn production in the US (green line) to corn allocated to ethanol production (blue line).

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