U.S. Ethanol Output Hits Record High, Lifts Corn Price

U.S. ethanol production soared to a record high as plants prepared for rising seasonal demand against a background of positive margins, supported by weak corn prices and rising crude oil values, according to agrimoney.com.

U.S. biofuel plants produced an average of 972,000 barrels of ethanol a day during the second week of June, the highest figure in the four years that records have been kept. Some increase had been expected, given the weak corn markets and strength in gasoline prices. The 6% increase over previous weeks’ output was buoyed by the latest round of Middle East unrest that has underpinned energy market overall. However, the extent of the increase took many investors by surprise.

Ethanol futures for August fell 3.7% to $1.991 a gallon in Chicago. Meanwhile, July corn futures stood at $4.43 a bushel. Margins for ethanol producers fell to about $0.50 a gallon, from $0.73 a gallon two weeks earlier.

Other factors may also have supported ethanol production volume. “It has a bit to do with demand expectation, in my view,” a Europe-based grain trader told Agrimoney.com. “You have the U.S. summer driving season coming up, when usage peaks, meaning that producers will be less concerned about building up inventories.”

Rich Nelson, chief strategist at Chicago broker Allendale, underlined that rising inventories had been, and remain, a worry for investors. Inventories fell during June by 572,000 barrels, he said, “but this is an issue that the market will continue to watch.”