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Lack of holiday travel may affect ethanol demand

Lack of holiday travel may affect ethanol demand

Cars at gas pump

After a November peak, grain prices have been sliding in early December, and that trend may continue.

During the week ending Dec. 4, corn traded lower for the second consecutive week for the first time since August, while soybeans saw the first overall week of declining prices since the rally that nearly hit $12. According to Keegan Madigan of Total Farm Marketing, exports may be to blame.

“Export sales of U.S. soybeans last week were by far a marketing-year low and the lowest for the week since 2008,” Madigan said. “Actual (corn) shipments fell short of the pace needed by 142 million bushels. The gap between sales and shipments may look concerning, but it is still early in the marketing year with plenty of time for shipments to catch up.”

Madigan noted that the soybean export issues are less concerning than corn as exports tend to lag behind in December, but the lack of sales in the past three weeks have hindered the markets from continuing their rally.

The other concerning factor for the corn market is ethanol demand. As the United States enters another month of the COVID-19 pandemic and the Christmas holiday looms, worries of significantly less travel may impact the fuel industry.

“The largest black eye for the corn market continues to be the ethanol side of the demand equation,” Madigan said. “A continued increase in COVID cases has clipped the wings of gasoline demand across the U.S.”

As of the latest inventory report, ethanol barrels are at a 24-week high, while estimated demand fell below 800,000 barrels per day for the first time since June 12. Madigan said the most concerning number from the recent report is blending activity falling to 21,000 barrels per day at the end of November, nearly 12.2% lower than this time last year.

South American weather continues to be a major factor for the grain markets as well, with dry weather concerns affecting the corn and soybean crops in that region. However, Madigan said prices in Brazil’s largest soybean state, Mato Grosso, are starting to ease back from record-high levels, falling 6.5% last week to 161.53 real ($13.85 in U.S. dollars) per bushel.

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