End of ethanol production streak signals start of another new normal

Illinois ag economist Todd Hubbs suggests the end of ethanol’s three-month streak of week-over-week production increases signals the start of another new normal.

“I’d like to see the (peak) a little bit higher because we’re still basically about 12 to 14 percent below where we’d normally be this time of year. But I think people are not moving around as much.”

He is encouraged by shrinking ethanol stocks.

“But, I think what you’re seeing is as gasoline demand flattens out, and about 10 percent of the gasoline supply is ethanol, the production numbers are sort of flattening out as well. It’s just a direct reflection of the demand we have for gasoline in the country.”

Hubbs tells Brownfield he expects ethanol demand to trend sideways through the end of the year.

  • I would like to comment on this article on several points.

    1. EIA’s Weekly Fuel Supply Estimates are just that, “Estimates”. So, we need to realize these are not real, hard fast numbers, they are educated “Estimates,” generated from partial data that is then factored into a weekly estimate each week. Two months after the fact, EIA publishes Actual Numbers for the respective months which usually revise the previous weekly estimates both up and down. For the year so far, I have the following Monthly Actual Revisions from EIA on my spread sheet for the weekly EIA Ethanol Production Estimates.

    January Up +12,226 Barrels per Day Up 1.15%
    February Up +1,034 Barrels per Day Up 0.10%
    March Up +10,500 Barrels per Day Up 1.01%
    April Down -12,464 Barrels per Day Down -2.02%

    So, as you can see, the final Actual Monthly Numbers can move EIA’s original weekly estimates up or down.

    2. During the March through June time frame, Ethanol pricing was significantly higher than gasoline pricing due to the significant drop in oil prices. I suspect that this unusual price relationship to gasoline contributed to reduced ethanol demand, especially for ethanol blends higher than E-10. Going forward ethanol pricing is predicted to return to its normal price relationship of being below gasoline, which should improve blending but especially the value of higher ethanol blends. So, the second half of the year may have some demand positives we have not seen during the last few months.

    3. On the negative side we have to keep our eye on the current Refiner Waver Requests to the EPA, both the current year requests and the Gap year requests. The potential waivers are a major concern for the Ethanol Industry and a major hot potato for the Administration.

    4. I am optimistic regarding gasoline demand, perhaps too optimistic. My wife and I just flew from Louisiana to Detroit and back again. The airports and planes were not full but they were not empty either. So, the more people travel and get out, the more willing they will be to do so, we have to keep living. I believe that COVID-19 is real, but I also believe that perhaps its over played. COVID is a virus, but it is not an automatic death sentence. June had Record Pork Production, so how did that happen? Perhaps the industry has learned how to cope with the COVID Virus, well done!

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