One of the big questions going into Friday's USDA supply and demand report, was just how much change would be expected in ethanol production. The supply and demand report measures the expected total corn bushels used for ethanol production, which is a different calculation than the Department of energy uses when focusing on total gallons of ethanol produced.
The current USDA estimate is that 4.5 billion bushels of corn will be used for ethanol production. This is unchanged from the January report estimate, and could allow for increased stability in the market.
The challenge is that this estimate is nearly 10% under year-ago numbers, while current ethanol production at the end of last week is running more than 16% lower than last year levels based on total gallons of ethanol produced.
The expectation in the market is that overall demand for ethanol will increase as the spring progresses and many of these idled and slowed plants will start and increase production.
But 2012 was a case in point that shows that if gasoline demand does not grow along typical summer patterns, it is impossible to build increased ethanol demand.
So for now, traders and most avid market watchers are not closely following the direction of corn market price and usage for ethanol, but also needing to keep a close eye on demand shifts in the gasoline markets.
Rick Kment can be reached at firstname.lastname@example.org
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