A further cold spell in the USA could bring further losses to the ethanol producers there, after the production sinks already for the second week in a row.
High energy prices during the recent cold spell in the Midwest had increased the cost of ethanol production. In addition, there was a shortage of tanker trucks delivering ethanol to refineries for blending into gasoline or export ports.
For the coming week, another cold spell is expected in the Midwestern United States; There is the largest density of ethanol plants there. The problems that have arisen are still present despite the currently milder temperatures.
Ethanol production for the week ended Jan. 5 was an average of 996,000 barrels per day (bpd), down 36,000 bpd from a week earlier. It was the first time since October that the production volume fell below the 1 million bpd mark. Over the past two weeks, daily production has fallen by 94,000 bpd. That was the biggest drop since the supervisory authority raised this data in 2010. At the beginning of December, production reached a record 1.108 million bpd.
The price of ethanol futures on the CBoT rose to a one-month high after the EIA published these figures.
The cold weather also meant that the repair work was neglected and the production is no longer optimal. The US ethanol stocks rose last by 100,000 barrels; the largest amount since May last year.
However, demand for ethanol and gasoline should not rise before the summer. About one-third of the US corn crop is converted to ethanol, which is then added to almost all gasoline products available in the US.
Analysts expect tomorrow the USDA will report increasing ethanol production in its WASDE report. The current decline in production is not yet included in the figures.
Text: HANSA Derivatives Trading GmbH /
