USA ETHANOL PRICES CONSISTENTLY DROPPED FOR THE SEVENTH WEEK IN A ROW

Since, the last month of the fourth quarter of 2021, the Ethanol market sentiments in the USA remained suppressed after witnessing exceptional gains throughout 2021 due to the higher feedstock prices. The producers offered quotations for Ethanol in West Cost on mid-January 2022 witnessed a drop of 36.27% compared to the start of December 2021. This market development is majorly caused by the softness in the demand outlook because of the higher running inventories, increment in the global production levels which resulted in the lower inquiries and exports to the overseas market.

Amid the high running inventories levels, the Biden administration is considering lowering the Ethanol blending mandate below the proposed 15 Billion gallons due to the pressure developed by the oil refining lobby and unions regarding the shrinkage of the US Ethanol industry. Whereas, the US EIA estimated that the projected consumption in 2022, will be below the consumption levels in 2019. Therefore, the unachievable production targets and dull demand because of the COVID pandemic forced numerous Ethanol facilities to shut down operations in the last few years.

The gains in Ethanol during 2021, were induced due to the enormous cost support from the corn prices, with an exceptional increment of nearly 45% year on year, and the ongoing market fundamentals showcased that the values for corn were likely to remain buoyed in 2022. In 2021, the fertilizers prices observed an unprecedented upward tally followed by the strict norms imposed on exports due to the rising food security concerns. According to the UN FAO “the food pricing index in December 2021, soared to the historical highs”. Whereas, 40% of the US corn output is diverted for Ethanol production. As a ripple effect, the supply-demand gap imbalanced with the limited availability of Ethanol, and the producers were forced to hike the quoted offers in 2021.

As per ChemAnalyst, during November 2021, the Ethanol production margins in the corn belt surged by USD 1.82 per gallon, and constant cost support from the higher feedstock cost soared the offers of Ethanol in Texas by 53% in the first half of the Q4 2021. Whereas, the current market indicators showcased that due to the ample inventories and inadequate demand amidst the COVID concerns, it is anticipated that the production level in the Ethanol facilities was likely to curtail with a significant margin.