EIA says US ethanol production falls to lowest level since October 2017

Source: By Wesley Swift, Plats • Posted: Friday, February 8, 2019

Houston — US ethanol production averaged 967,000 b/d in the week that ended February 2, a 45,000 b/d decrease compared with the previous week and the lowest level seen in nearly 16 months, Energy Information Administration data showed Wednesday.

Production was down 90,000 b/d or 8.5% year on year, and well below market expectations.

The fall in production was the sixth decrease in production in seven weeks.

Production margins have diminished as a result of steady-to-higher corn prices and falling ethanol prices. The crush margin, the difference between Chicago Argo terminal ethanol and CBOT corn futures, has been consistently negative since mid-October and was minus 5.18 cents/gal Tuesday. This has resulted in some destination facilities cutting or idling production.

Production was also impeded last week by harsh polar vortex weather, with temperatures well below freezing. At least two plants were reported to have cut back on their production due to logistical issues associated with the weather.

Total stocks fell 33,000 barrels or 0.1% week on week to 23.947 million barrels, with four of the five defined regions showing declines. The weekly stock decrease was in line with market expectations. Inventories were 458,000 barrels higher year on year.

Midwest inventories rose 100,000 barrels or 1.3% week on week. The Midwest is host to the largest number of ethanol plants across all US regions. East Coast inventories rose 48,000 barrels or 0.6% week on week to 7.726 million barrels.

West Coast stocks increased 27,000 barrels despite the EIA again reporting no imports on the week, which was the 12th straight week this had been the case. The West Coast is the most common destination for imports as Brazilian sugarcane-based ethanol benefits from both D5 RINs and Low Carbon Fuel Standard credits.

The Gulf Coast was the lone region to report a storage draw, shedding 222,000 barrels. The Gulf Coast is the most common origin for ethanol exports from the US.

The four-week rolling average of the refiner and blender net ethanol input was 18,000 b/d higher at 875,000 b/d, while the weekly average increased 17,000 b/d to 887,000 b/d.

The four-week rolling average of gasoline demand, represented by product supplied, rose 85,000 b/d to 9.018 million b/d, while the weekly average fell 491,000 b/d to 9.073 million b/d.

The four-week rolling average of the ethanol blending rate, calculated by dividing the refiner and blender ethanol input by gasoline demand, rose to 9.70% from 9.59%.

— Wesley Swift, wesley.swift@spglobal.com