Despite Production Fluctuations, USA's Ethanol Market Shows Resilience in Early June

Texas (USA): The Ethanol market maintained stable prices during the initial week of June. On June 7th, Ethanol prices were recorded at USD 650 per metric ton (MT), reflecting a marginal weekly increase of USD 5 per MT, or 0.8%, on a Free on Board (FOB) basis from Texas. This price stability was underpinned by moderate supply and demand dynamics, with Ethanol production averaging 1.023 million barrels per day. This figure represented a decrease from the previous week’s production of 1.072 million barrels per day but showed an overall balanced market environment.

Ethanol supply dynamics were characterized by moderate production levels and stable inventory management. Despite the decline in weekly production, Ethanol stocks rose nearly 1% to 23.222 million barrels, ensuring sufficient supply to meet current demand. The increase in stocks was a critical factor in preventing significant price adjustments, maintaining market equilibrium.

Demand for Ethanol blending was relatively low, primarily because regions completing winter blending experienced reduced consumption. Additionally, summer blending mandates had not fully commenced by June 7th, contributing to a temporary lull in blending demand. However, consistent downstream industrial demand for Ethanol, utilized in solvents and chemical feedstocks, helped offset these fluctuations, ensuring a balanced market. Ethanol exports also supported this stability, averaging 123,000 barrels per day, although this represented a decline of 89,000 barrels from the previous week.

In May 2024, several Ethanol plants underwent maintenance shutdowns, temporarily impacting production but not significantly disrupting overall operations. Green Plains Fairmont LLC and Flint Hills Resources LP in Fairmont, USA, had maintenance shutdowns affecting 24,194 barrels and 29,245 barrels, respectively. Golden Grain Energy LLC in Mason City, USA, had a planned shutdown affecting 19,181 barrels, while White Energy, Inc. in Texas faced a force majeure shutdown due to a storm, impacting 31,749 barrels. Despite these events, operations were largely unaffected.

The USDA’s June supply and demand report indicated stable future supply expectations, maintaining forecasts for corn use in Ethanol production at 5.45 billion bushels for 2024-25. Stable feedstock costs, with corn priced at USD 4.40 per bushel, prevented significant production cost fluctuations, supporting consistent Ethanol prices.

The overall Ethanol market in the USA remained stable during the first week of June, supported by moderate supply levels and consistent demand from industrial applications. Although there were minor price fluctuations, the balanced supply-demand dynamics ensured market stability. As the peak blending season progresses, demand is expected to stabilize, influenced by summer travel and blending mandates. Additionally, fluctuations in raw material costs and government interventions will play crucial roles in shaping the market.

Looking ahead, Ethanol prices are projected to experience modest changes, with an increase in June and July, and a decline in August. These forecasts consider heightened gasoline demand, potential increases in Renewable Fuel Standard (RFS) blending requirements, and stable corn prices. The market is well-positioned to navigate upcoming seasonal demand shifts without significant disruptions.