At first glance at the weekly EIA data released in the morning report and the strong continued pressure in ethanol prices, the numbers don't seem to add up. The report actually posted a strong drawdown in ethanol stocks at the end of last week. A 16.8-million-gallon drop in ethanol stocks to be exact. But as you look closer at the numbers, the aggressive 4.8% growth in ethanol production compared to the previous week just seems to jump out and grab you. This accounted for a 1.8-million-gallon-per-day growth in overall output. So on a weekly basis, 12.6 million more gallons were produced last week than the week previous. Growth in production like that would very quickly erode any bearish inventory data if this trend continues through the month of April. Overall demand for ethanol is expected to continue to grow through the next couple of months based on expected seasonal driving demand needs. But refiner inputs actually slipped 0.5% from the week previous. This is quickly moving ethanol prices back to the $2-per-gallon price range, and creating the potential for additional moderate to sharp price pressure to develop over the near future. There is expected to be increased focus on both ethanol production levels over the next month, as well as inventory level growth. The industry does not want to get into an "ethanol glut" situation once again either. So balancing supplies and overall production could be a tricky task through the summer months.
Rick Kment can be reached at email@example.com
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