Corn used for ethanol production
“Much has been made of the recent surge in domestic ethanol production and the re-opening of some ethanol plants,” Good said. “Based on weekly estimates from the EIA, ethanol production in the first two months of the 2013-14 corn marketing year of 2.226 billion gallons was about 7.5 percent larger than production during the first two months of the 2012-13 marketing year. The increase, however, may not imply any substantial increase in domestic ethanol consumption, but instead may reflect changes in net trade and stock levels. Imports totaled only 23.5 million gallons in September and were zero in October. Export estimates for those two months are not yet available but would have totaled about 100 million gallons if the August pace was maintained,” he said.
Stocks of ethanol were about 75 million gallons less at the end of October than at the end of August, Good added. Domestic consumption in the two months may have totaled about 2.225 billion gallons, a year-over-year increase of about 2 percent. Estimates of domestic consumption for September will be available with EIA estimates of production, trade, and stocks to be released in the last week of November.
“Importantly, estimated ethanol production during the first two months of the 2013-14 marketing year was 3.2 percent less than during the first two months of the 2011-12 marketing year,” Good said.
For the current marketing year, the USDA projects corn used for ethanol and co-product production at 4.9 billion bushels. “Actual consumption of corn could be somewhat different than that projection, depending on domestic consumption of ethanol, net ethanol trade, and the change in ethanol stock levels,” Good said. “Domestic ethanol consumption will be influenced by biofuels policy and by ethanol prices. Ethanol prices will in turn be influenced by corn prices.
“It is generally assumed that domestic ethanol consumption will be at least as large as in the past three years, near the 10 percent blend wall of 13 billion gallons,” Good said. “However, if the EPA reduces the total and renewable biofuels mandates for 2014, as has been rumored, domestic consumption could be less than 13 billion gallons if obligated parties choose to use more of the Renewable Identification Numbers (RIN) stocks to meet the renewable mandate. That choice would likely be influenced by an assessment of the risk of EPA rule making being overturned by the courts. On the other hand, maintaining the renewable mandates at higher levels and/or low corn and ethanol prices could stimulate E85 consumption and push domestic ethanol production above the 10 percent blend wall,” he said.
Good said that ethanol trade will also be influenced by biofuels policy as the size of the reduction in the advanced biofuels mandate for 2014 could influence the demand for imported ethanol. Under blend-wall constraints, ethanol imports substitute for domestic ethanol production.
“A better indication of which ethanol and corn scenario will unfold will be available when EPA releases preliminary rule making for 2014,” Good said. “For the corn market, the implications may be more important for future marketing years than for the current year since it will influence the magnitude of needed corn production.”
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