Exports of US ethanol are surging, but production is booming -Braun
The U.S. ethanol stock dropped last week despite a surge in production. This was partly due to the sharp rise in gasoline demand which reached three-year highs.
Even though the production of corn-based ethanol has been setting records, record exports of the fuel additive have kept U.S. supplies under control.
The abundance of cheap corn, and the relatively low prices of natural gas, have helped to support profit margins among U.S. producers who account for almost 40% annual corn consumption in the U.S. The ethanol production over the past three months has been at a record high, and coincided with a 20% drop in U.S. prices.
The 2020 COVID-19 Pandemic, which slowed fuel demand and put pressure on the U.S. Corn Industry, made it unclear if or when new ethanol records would be achieved.
The demand for motor gasoline in the United States has not yet recovered to its pre-pandemic level, which is a factor that negatively impacts ethanol consumption. In recent months, however, implied U.S. consumption of ethanol has been high, and even set some weekly records.
The timing is perfect for U.S. exporters of ethanol, as many countries are ramping up their plans to reduce carbon emission using biofuels.
The United States is the largest producer of ethanol in the world, producing just over half the yearly global production.
MEATY EXPORTS
Census Bureau data released on Tuesday shows that U.S. exports of ethanol will reach a record high between September 2023 to August 2024. This spans the U.S. corn-marketing year 2023-24.
August was the fifth consecutive month where a monthly export record had been set. Total ethanol shipments during that five-month stretch were 30% higher than the previous record.
Canada was responsible for 37% and the United Kingdom, a relatively new customer, accounted for 13% of the ethanol shipments in 2023-24. The recent push to use cleaner fuels has driven both trade relationships.
India is the third largest destination for U.S. ethanol. The demand for corn-based ethanol in India, the No.
India, which was a major U.S. customer of ethanol before, is moving away from sugar-based sugar ethanol. Brazil's high import tariffs for U.S. gasoline have made this trade prohibitive over the last couple of years.
Brazil is the No. Brazil is the world's No.
CORN BALANCE SHEET
The Energy Information Administration reported on Wednesday that U.S. stocks of ethanol fell more than 5% in the last week, to their lowest level since December. However, supplies remain above average for this time of the year.
Exports have helped to alleviate the problem. This is especially true given the high production levels. Exports and ethanol output could be robust in the months to come, which is a crucial time for U.S. Corn processing, particularly if a bumper harvest occurs.
Analysts expect that on Friday, the U.S. Department of Agriculture will confirm its belief that the corn harvest in progress for 2024 will be the second largest on record after 2023.
USDA's September estimate pegged U.S. Corn used for ethanol to decline slightly from 2023-24 in 2024-25. However, this order could need to be reversed if ethanol rates continue to rise early next year. Karen Braun is the market analyst at. The views expressed are Karen Braun's.
(source: Reuters)
