Rising Production Rates and Demand From Overseas Market Thrusts US Ethanol Prices

Texas- In the first week of June, Ethanol production and inventories increased in the US market proportionally, knocking off the slow momentum of Ethanol prices in the domestic market. Throughout the past month, the sufficient availability of the product with domestic and international buyers governed the overall market dynamics of Ethanol in the North American region. Moreover, the demand-supply gap between the Ethanol manufacturer and the end-use manufacturing units such as biofuel producers, food, and pharmaceutical sectors has narrowed. As a ripple effect, the operational rate in the country has increased owing to the higher product inquiry and sufficient stockpile. Price quotations for Ethanol in the US market range between USD 810-860 per MT, FOB Texas and the giant players aim to keep the production rate on the upper edge.

According to the Renewable Fuels Association, net Ethanol refiner and blender inputs and the volume of petrol delivered to the market were lower last week. Few Ethanol plants are returning to service following periodic maintenance and a halt in operational activities as the sector prepares for the summer driving season and enhanced E15 access, but the industry remains concerned about long-term demand. The US government relies on Ethanol blended fuel production and higher trading volume in the international market. Moreover, production in the US relies on the country's upstream (corn) and ample availability. According to the Chicago Board of Trade (CBOT), the most active maize contract rose approximately by 1% from the previous month.

On the maize front, the US government officials demonstrated the severity of concerns, with the market selling lower quantities of the feedstock (corn) and Ethanol in the early stages with weather projections indicating inadequate moisture for the maize Belt. High temperatures are predicted to moderate by the weather forecasters, but moisture is the primary concern right now for Ethanol manufacturers. Major Ethanol manufacturers and buyers have kept their keen attention on the corn yield and will be watching the Drought Monitor for better Ethanol production capacity.

The US authorities are also trying to pressure the Brazilian government as Brazil's reintroduced import taxes on American Ethanol may affect US agricultural and biofuel production in the upcoming quarter. Furthermore, US producers have not been certified for Brazil's RenovaBio biofuel program, although Brazilian Ethanol manufacturers have access to the US Renewable Fuel Standard and California's Low Carbon Fuel Standard programs in the United States. As per ChemAnalyst, Ethanol prices in the US market are expected to follow the inclining trend in the upcoming weeks as the demand outlook for the product from end-use manufacturing units may remain continuous from domestic and overseas buyers.