Grain Market Outlook Newsletter
U.S. Ethanol and Biodiesel Market Situation
A. Ethanol Price & Profitability Trends
Using an Iowa State University model and applying price estimates from Kansas State University, ethanol plants in Iowa and other Midwest states were operating at estimated losses on average of –$0.09 /gallon for June 1-19, 2020. These ethanol plant operating loss estimates have continued since August 2018 – averaging monthly operating losses ranging from of -$0.02 to -$0.17 per gallon over the August – December 2019 time period, -$0.12-$0.28 per gallon in January-May, 2020.
During the June 1-19, 2020 period, corn input purchase prices for Iowa ethanol plants are estimated to have averaged near $3.07 /bu – compared to $2.94 in May, $2.91 in April, $3.45 in March, $3.76 /bu in February, and $3.81 in January.
Selling prices of distillers dried grains (DDGS) (10% moisture) averaged near $127.18 during the June 1-19 period, down from $143.75 in May, a high of $194.66 per ton in April, $147.05 in March 2020, and $143.00 in February.
The selling price of ethanol via tank car and truck shipment out of Iowa ethanol plants is estimated to have averaged near $1.19 / gallon during the June 1-19, 2020 period, being up from 1.0575 in May, 0.794 /gallon in April, and $1.07 per gallon in March, while being down from $1.24 per gallon in January-February 2020.
The cost of production of a representative ethanol plant in Iowa is estimated to be near $1.28 / gallon during the June 1-19 period, up from $1.18 in May, and $1.01 in April, but down from $1.35 in March, and the range of $1.45 – $1.51 per gallon during the October 2019 through February 2020 period.
B. Ethanol Production & Stocks Trends
Since the beginning of the “new crop” 2019/20 marketing year (MY) for U.S. corn on September 1, 2019, U.S. ethanol production through June 12, 2020, has averaged 0.931 million barrels per day (mb/d) – with a range of 537 (on April 24th) to 1,095 mb/d (on January 10th) over the 41 week period. At this average pace throughout the remaining 11 weeks of “new crop” MY 2019/20, U.S. ethanol production would reach 14.274 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 5.043 billion bushels (bb) of feedgrains would be used for ethanol production in the current marketing year.
The USDA’s latest World Agricultural Supply and Demand Estimates (WASDE) report on June 11, 2020 have a forecast in “new crop” MY 2019/20 of 4.900 bb of U.S. corn would be used for ethanol production, and that 70 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 4.968 bb, or 98.5% of the KSU projection of 5.043 bb.
During the April 3-May 15 period when COVID-19 mitigation efforts had such a dire, damaging impact on the U.S. economy, motor fuel use, and the U.S. ethanol market, U.S. ethanol production had fallen to an average of 603,000 barrels per day. The April-May average of 634,000 barrels per day average is 61% of the pre-COVID-19 February through March 20th average of 1,041,000 barrels per day – which is consistent with ethanol industry reports of U.S. ethanol production cutbacks during that time period. However, for the weeks ending June 5th and 12th, U.S. ethanol production averaged 837K and 841K barrels per day, respectively – recovering to approximately 80.6% of February-March 20th production levels.
United States’ ethanol stocks have averaged 23,250,000 barrels per week since the beginning of the “new crop” MY 2019/20k, i.e., in early September 2019 – through June 12, 2020. After reaching highs of 27.1-27.7 million barrels during the COVID-19 affected 1st three weeks of April, ethanol stocks have declined approximately 22% down to 21.35 million barrels by the week ending June 12th.
C. Biodiesel Price & Profitability Trends
The estimated profitability of Iowa Biodiesel plants first increased and then declined during the January-June 19, 2020 period.
By Kansas State University estimates, during the June 1-19, 2020 period, soybean oil input purchase prices for Iowa biodiesel plants averaged $27.20 per cwt – up from $25.59 in May, $26.97 in April.
The selling price of Biodiesel at Iowa Biodiesel Plants is estimated to have averaged $2.70 /gallon during the June 1-19 period, comparable to $2.58 in May, $2.70 /gallon during April, $3.01 in March, $3.10 in February 2020, and the 26 month high of $3.16 /gallon in January.
Also during the June 1-22 period, the cost of production at representative biodiesel plants in Iowa is estimated to have averaged $2.70 per gallon – up from $2.58 in May, and comparable to $2.61 in April, $2.67 in March, $2.88 in February, and $3.12 in January 2020.
As a result, net returns of this representative soy biodiesel plant in Iowa during June 1-19, 2020 were estimated to be breakeven at $0.00 per gallon produced. This is comparable to a small loss of -$0.01 /g in May, and to profits of $0.09 /g in April, $0.34 in March, $0.21 in February, and $0.04 /g in January 2020.