Ethanol Demands Could Beat USDA’s Corn Consumption Estimates: Economist

Source: By Jordan Godwin. OPIS • Posted: Wednesday, January 11, 2017

Considering the way ethanol production rates closed out 2016, the industry could blow past the U.S. Department of Agriculture’s estimates for how much corn could be consumed by ethanol production, University of Illinois Agricultural Economist Todd Hubbs said.

In a research paper posted Monday, Hubbs cited the record-high ethanol production rate of 1.043 billion b/d set in the week ended Dec. 30 as a possible harbinger of strong ethanol production in 2017.

In its latest World Agricultural Supply and Demand Estimates (WASDE), USDA forecast corn consumption for U.S. ethanol production in the 2016/2017 marketing year to total 5.3 billion bushels, up from the 2015/2016 estimate of 5.206 billion bushels.

Hubss, however, believes it’s not crazy to think that estimate could rise in the coming months.

“When taking into account an increase in projected gasoline consumption in 2017 and robust ethanol export levels, the ability to surpass this projection is a strong possibility,” he added.

Hubbs cited the latest estimates from the U.S. Energy Information Administration
(EIA) in the December Short Term Energy Outlook (STEO) projecting gasoline consumption could swell to 143.6 billion gal in 2017, up from the 142.72 billion gal consumed in 2016. EIA forecast ethanol production this year will average about 1 million b/d, good for an annualized rate around 15.3 billion gal.

Hubbs also touched on the robust ethanol export demand. According to U.S. Census trade data released last week, ethanol exports through November were at 948 million gal, a 27% jump from the same period of 2015. If ethanol exports again approach 1 billion gal in 2017, production will likely have to ramp up even more, drawing even more corn bushels.

“Lower corn prices, strong ethanol exports, and greater blending requirements combine to make 2017 appear to be a strong year for corn consumption in ethanol production,” Hubbs said.