Poor ethanol-plant margins, plants idling production and continued haggling concerning small-refinery exemptions provide the background for ethanol production moving into the 2019-2020 marketing year. Corn use for ethanol production during the 2019-2020 marketing year looks set to recover slightly from the weak levels seen during the 2018-2019 marketing year.
Based on ethanol-production estimates provided by the U.S. Energy Information Administration, U.S. fuel-ethanol production during the 2018-2019 corn marketing year totaled 15.572 billion gallons. At about 500 million gallons less than the previous marketing year, ethanol production came in at a decrease of 3.1 percent. Exports sit on pace to total less than the previous year’s 1.636 billion gallons. Ethanol stocks during the marketing year increased by 332 million gallons despite decreased production..
The final “Grain Crushings and Co-Products Production” report for the marketing year came out Sept. 1. Ethanol production and recent conversion ratios indicate that corn used for fuel-ethanol production totaled about 5.366 billion bushels, a decrease of 4.3 percent from use during the previous year. Reported use of sorghum for fuel-ethanol production during the 2018-2019 corn marketing year totaled about 100 million bushels, compared to 60 million bushels during the previous year. Combined corn and sorghum use during the past year were 3.5 percent less than reported use during the previous year.
Ethanol production thus far in the 2018-2019 marketing year sits 4.4 percent less than the previous year during the same period. The U.S. Department of Agriculture’s current projection totals 5.45 billion bushels for the marketing year. Numerous factors look to influence corn use for ethanol production during the current marketing year. Domestic gasoline consumption, the rate of consumption of increased-ethanol blends and the extent of fuel-ethanol exports remain vital components.
Domestic gasoline consumption depends on the price of crude oil and gasoline prices. The U.S. Energy Information Administration’s recent short-term energy outlook projects gasoline consumption during the next marketing year to increase slightly, with national average gas prices as much as $2.76 per gallon in 2020, an increase from the $2.65 per gallon seen in 2019. If those price forecasts are correct, gasoline consumption would be expected to remain relatively flat during the next marketing year.
The Energy Information Administration’s projection for ethanol production in 2019-2020 sits at 15.961 billion gallons with considerable strength in the second half of the marketing year. Approval of E-15 blending all year long may provide the support for that projection. A slight increase in the consumption of greater blends may occur if prices stay competitive. Greater blend consumption will not likely add substantially to total domestic-ethanol consumption this year.
Sorghum use for ethanol production appears set to remain unchanged due to trade issues with China, despite a slightly smaller crop projection for 2019. An increase in ethanol production efficiency would undercut any increase in feedstock consumption this year. If recent conversion ratios stay in place, corn use for ethanol under Energy Information Administration’s ethanol-production forecasts comes in at almost the 5.45 billion bushels projected by the USDA.
Ethanol exports for the 2018-2019 marketing year show no growth when compared to the previous marketing year. Ethanol-export numbers are available from U.S. Census trade data through July 2019. For the 2018-2019 marketing year U.S. exports of ethanol are at 1.437 billion gallons, a decrease of 4.9 percent from the similar period during the 2017-2018 marketing year. The reduction is due to decreased export levels to Brazil and China. Chinese imports of U.S. ethanol are minimal thus far in the marketing year. A continuation of the current trade war mitigates any chances of expanded exports to China during the next year.
Brazilian ethanol imports from the United States decreased 17 percent from the previous year through July. During the 2017-2018 marketing year U.S. ethanol exports totaled 1.636 billion gallons, with exports to Brazil comprising 28.4 percent of the total. Increased ethanol production from sugar, the continuation of the 20-percent tariff-rate quota on Brazilian ethanol imports and a burgeoning corn-ethanol industry in Brazil may see that trend continue during the next marketing year.
Recent adjustments to the tariff in Brazil maintained the 20-percent tariff level but increased the quota to export levels greater than 198.1 million gallons per year, an increase from about 160 million gallons. U.S. ethanol exports will require continued expansion in other markets to meet or exceed the export levels attained during the 2018-2019 marketing year.
While negotiations on small-refinery exemption continue to play out, the prospect of substantial growth in corn use for ethanol this marketing year seems limited. Barring a significant change in policy surrounding the Renewal Fuel Standard, a trade deal or an unexpected jump in gasoline consumption, the prospects for corn use in ethanol appear set to match current USDA projections of 5.45 billion bushels at best.
Visit aces.illinois.edu for more information.