EIA data shows 58,000 b/d fall in ethanol production, stocks surge

Stocks of ethanol have risen sharply and production has recorded its biggest week-on-week fall in the week ending December 29, according to data from the Energy Information Administration.

Production fell by 58,000 barrels a day to 1.03 million b/d – itself the lowest production volume since the week ending October 13, 2017, when it was pegged at 1.02 million b/d.

Stocks have also surged by 600,000 barrels to 22.61 million barrels, according to the data, the highest stock level since the week ending May 19, 2017 when it reached 22.68 million barrels.

It is also the biggest upward move in stock levels since the week ending September 29, 2017 and represents a blow to the support that energy demand has leant to the corn complex in recent weeks.

CBOT corn futures contracts had fallen 2.25 cents/bu to $3.5075/bu with the data seen as “bearish for CBOT” according to Terry Reilly of Futures International via a research note.

Ethanol production has provided a reliable outlet for US corn in recent weeks, with production establishing a fresh record high of 1.1 million b/d at the start of December and stock levels kept in check by steady demand.

The phenomenon has been pronounced enough to see market sources expect the USDA to increase its corn to ethanol consumption figure in the upcoming WASDE report, due to be released on January 12.

Rising gasoline prices, on the back of increased crude prices, and wider adoption of E15 – gasoline with 15% ethanol content, versus the usual 10% – have helped soak up ethanol production.

However, some trading sources have expressed concern that, with winter closing in and ethanol prices under severe pressure, the outlet would prove less viable as producers consider trimming runs as their margins narrow, leading to a fall in production and denting demand for corn.