Grain Market Outlook Newsletter

A Newsletter by K-State Extension Grain Economist, Dan O'Brien.

A semi-monthly newsletter by K-State Extension Grain Economist, Dan O'Brien. 
Visit "Focused on Grains Blog" by Dan O'Brien. 

U.S. Ethanol and Biodiesel Market Situation

November 25, 2020
Daniel O'Brien

A. Summary

During the November 1-20, 2020 period, ethanol produced in plants in Iowa in the Midwestern U.S. cost $1.42 per gallon of ethanol produced, based on average corn input price of $4.04 per bushel.  With coproduct sales prices for dried distillers grains (DDGS-10% moisture) at $183.75 per ton, and ethanol selling prices averaging $1.38 per gallon.  With ethanol selling prices of $1.38 and breakeven costs of $1.42 per bushel, ethanol plants in Iowa in the Midwestern U.S. were estimated to have lost $0.04 per bushel during the November 1-20 period. 

United States ethanol production to date in the “new crop” 2020/21 marketing year is on pace to meet the USDA’s projection of 5.050 billion bushels.  Biodiesel production in the Iowa is estimated to have had financial losses of $0.16 per gallon during the November 1-20, 2020 period.

B. Ethanol Price and Profitability Trends in the Midwestern U.S.

During November 2020 to date, corn input purchase prices for Iowa ethanol plants have averaged near $4.04 per bu, compared to $3.78 in October, $3.51 in September, and the range of $2.95-$3.09 during the April-August period. Weekly average corn prices paid at Iowa ethanol plants rose from $3.93 for the week ending 11/6, to $4.03 for the week ending 11/13, and $4.15 for the week ending 11/20.  Corn purchase prices at Iowa ethanol plants ranged from $4.1150 to $4.365 per bushel on Tuesday, November 24th.

The cost of production of a representative ethanol plant in Iowa is estimated to be near $1.42 / gallon during the November 1-20 period, up from $1.40 in October, $1.35 in September, $1.27 in August, and the range of $1.01 to $1.29 during April through July 2020.

Distillers dried grains (DDGS) (10% moisture) or “DDGS10% moisture” averaged $183.75 per ton during the November 1-20 period, up from $160.59 in October, $138.15 in September, the range of $117.83 to $127.49 during June-August, $143.33 in May, and $192.05 in April 2020.  Iowa DDGS10% moisture prices have increased throughout the month of November, from $175.33 /ton for the week ending on 11/6, to $183.73 for the week ending 11/13, and $192.20 on 11/20.  DDGS10% moisture sales prices at Iowa ethanol plants ranged from $180-$205 per ton for the week ending 11/20/2020.

The selling price of ethanol via tank car and truck shipment out of Iowa ethanol plants averaged $1.38 / gallon during the November 1-20, 2020 period, essentially unchanged from $1.378 in October, but up from $1.30 in September, and comparable to $1.18 in August, $1.28 /gallon in July, $1.19 in June, and $1.00 in May 2020. Weekly ethanol prices paid at Iowa ethanol plants declined from $1.44 per gallong for the week ending 11/6, to $1.42 for the week ending 11/13, and $1.28 for the week ending 11/20.  Ethanol sales prices at Iowa ethanol plants ranged from $1.16 to $1.45 per bushel on Tuesday, November 24th, averaging $1.28.

Using an Iowa State University model for instate ethanol plants, estimated losses of –$0.04 /gallon are projected for the November 1-20, 2020 period, compared to losses of –$0.02 /gallon in October, –$0.07 /gallon in September, and –$0.09 /gallon in August.   These estimated ethanol plant operating losses have continued for 27 months since August 2018 – with average operating deficits of -$0.14 per gallon – ranging from of breakeven to -$0.26 per gallon over the August 2018 – November 20, 2020 time period.

C. U.S. Ethanol Production & Stocks Trends

Through the first eleven (11) weeks of the “new crop” 2020/21 marketing year for corn (from the week ending September 4 through November 13th, U.S. ethanol production averaged 0.933 million barrels per day (mb/d). At this average pace throughout the remaining 41 weeks of the marketing year, U.S. ethanol production would reach 14.310 billion barrels in “new crop” MY 2019/20.  Further, at a rate of 2.83 gallons of ethanol per bushel of feedgrain used for ethanol production (corn and/or grain sorghum), a total of 5.056 billion bushels (bb) of feedgrains would be used for ethanol production in “new crop” MY 2020/21.

The USDA’s latest World Agricultural Supply and Demand Estimates (WASDE) report on November 10, 2020 have a forecast in “new crop” MY 2020/21 of 5.050 bb of U.S. corn would be used for ethanol production, and that 40 million bushels (mb) of U.S. grain sorghum would be used for Food, Seed, and Industrial (FSI) uses – which is primarily industrial ethanol production. Estimating 2 mb in other FSI usage for U.S. grain sorghum for non-ethanol uses (i.e., seed & other), total U.S. feedgrain usage for ethanol production in “current” MY 2019/20 would equal 5.088 bb, or 100.75% of the KSU projection of 5.050 bb.

United States’ ethanol stocks have averaged 19,865,000 barrels per week so far during “new crop” MY 2020/21, i.e., from early September 2020 – through November 13, 2020.  After reaching highs of 27.1-27.7 million barrels during the COVID-19 affected 1st three weeks of April, ethanol stocks declined approximately 25% down to an average of 20.329 million barrels during July-August 2020.  And, during the 16th week in “new crop” MY 2020/21, U.S. ethanol stocks were 20,203,000 barrels per week – down 27% from the high of 27,689,000 barrels the week of April 17, 2020.

D. Biodiesel Price & Profitability Trends in the Midwestern U.S.

By Kansas State University estimates, during the November 1-20, 2020 period, soybean oil input purchase prices for Iowa biodiesel plants averaged $36.66 per cwt – up from $34.28 in October, $34.05 in September, $32.47 in August, and $29.61 in July.

The selling price of biodiesel at Iowa Biodiesel Plants is estimated to have averaged $3.22 /gallon during the November 1-20 period, up from $2.98 in October, $3.13 in September, $3.06 in August, $2.83 in July, $2.71 in June, and $2.57 in May 2020,

Also during the November 1-20 period, the cost of production at representative biodiesel plants in Iowa is estimated to have averaged $3.37 per gallon – up from $3.19 in October, $3.13 in September, but up from $3.05 in August, $2.84 in July, $2.70 in June, $2.55 in May, and $2.57 in April 2020.

Net returns of this representative soy biodiesel plant in Iowa during November 1-20, 2020 were estimated to be a loss of $0.16 per gallon produced.  This is comparable to losses of $0.21 per gallon in October, losses of $0.05 in September, and breakeven in August.

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