September 24, 2014
Ethanol production in the U.S. fell 4.5% last week from the previous week to 889,000 barrels per day marking the industry’s weakest showing since March because of falling prices. The decline in production is one of the largest since 2010 and follows tightening margins as ethanol prices fall at a significantly faster pace than corn prices. This month, ethanol prices for November have fallen 18% while corn futures for December have fallen less than 11%. After spot margins of approximately .50 cents per gallon of ethanol, U.S. ethanol inventories hit 18.81 million barrels causing spot margins to fall to .15 cents per gallon of ethanol. While the margins are low mills will likely come offline to conduct maintenance that was delayed while margins were higher affecting the market even further, however, as the country’s corn crop is harvested the drop in output should correct itself.
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