U.S. Ethanol and Biodiesel Markets and Profitability – Moderate Losses for Ethanol and Biodiesel in April to Date

A. Ethanol Price and Profitability Trends

By Iowa State University estimates, ethanol plants in Iowa and other Midwest states were operating at losses of $0.10 to $0.23 per gallon from September 2018 through March 2019 – with $0.14 /gallon losses in March 2019.  By Kansas State University calculations, these losses extended into the April 1-19 period, with losses of $0.12 / gallon.

During the April 1-19, 2019 period, corn input purchase prices for Iowa ethanol plants averaged $3.47 /bu – compared to 3.55 /bu in March.  Selling prices of distillers dried grains (DDGS) (10% moisture) averaged $138.17 /ton during April 1-19, up from $135.77 /ton a month earlier. The selling price of ethanol via tank car and truck shipment out of Iowa ethanol plants has averaged $1.29 /gallon during April 1-19, down from $1.3086 /gallon in March.

Overall, during the April 1-19, 2019 time frame, the estimated cost of production of a representative ethanol plant in Iowa has averaged $1.41 per gallon – comparable to $1.45 per gallon in March, and $1.44 in February.  This has lead to an estimated average negative net return of minus $0.12 per gallon produced so far in April 2019, with is comparable to losses of $0.14 /gallon in March and losses of $0.23 /gallon in February 2019.

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B. Ethanol Production & Stocks Trends

Since the beginning of the “current” 2018/19 marketing year (MY) for U.S. corn on September 1, 2018, U.S. ethanol production has averaged 1.026 million barrels per week over 32 weeks. At this average pace, U.S. ethanol production would reach 15.730 billion barrels in “current” MY 2018/19.  Further, at a rate of 2.83 gallons of ethanol per bushel of feedgrain used for ethanol production (corn and/or grain sorghum), at total of 5.558 billion bushels of feedgrains would be used for ethanol production in the current marketing year.

The USDA’s latest World Agricultural Supply and Demand Estimates (WASDE) report on April 9, 2018 seem to account for this.  In the April WASDE report the USDA projected that in current MY 2018/19 a total of 5.500 billion bushels (bb) of U.S. corn would be used for ethanol production, and that 100 million bushels (mb) of U.S. grain sorghum would be used for Food, Seed, and Industrial (FSI) uses – which is primarily industrial ethanol production.

However, the pace or weekly rate of U.S. ethanol production has slowed marginally during February – April 2019 (to date) compared to the September 2018 through January 2019 period.  For September 2018 through January 25, 2019, U.S. ethanol production averaged 1.034 billion barrels per week, while that rate slowed 3.1% to 1.004 per week for the weeks ending February 1st through April 12th.

At the same time U.S. ethanol stocks have remained at historically high levels – burdening the ethanol market and having a negative impact on U.S. ethanol prices.  To explain, for the “current” 2018/19 marketing year period from September 1, 2018 through the week ending April 12th, U.S. ethanol stocks have averaged 23.463 million barrels (mln brls) per week.  This compares to average end of week ending stocks for previous U.S. corn marketing years of 22.201 mln brls per week in “old crop” MY 2017/18; 21.259 mln brls per week in MY 2016/17; 20.846 mln brls in MY 2015/16; 19.466 mln brls in MY 2014/15; 16.618 mln brls per week in MY 2013/14; 18.104 mln brls per week in MY 2012/13; 19.569 mln brls per week in MY 2011/12; and 18.416 mln brls per week in MY 2010/11.  These data show the growing in U.S. ethanol stocks over the last few marketing years, and highlight the record size of U.S. ethanol supplies that burden the U.S. ethanol market at the present time.

C. Biodiesel Price & Profitability Trends

Reductions have also occurred in the estimated profitability of Biodiesel plants in Iowa and nearby states – although the losses are comparatively small relative to ethanol producing facilities during the April 1-19, 2019 period.

By Kansas State University estimates, during the April 1-19, 2019 period, soybean oil input purchase prices for Iowa biodiesel plants averaged $28.40 per cwt – down from an average price $29.13 /cwt in March 2019.   This occurred while Biodiesel selling prices averaged $2.77 /gallon during 4/1-19/2019, being down from $2.87 /cwt in March.

Also during the April 1-19 period, the cost of production at representative biodiesel plants in Iowa has averaged $2.81 per gallon – down from $2.86 per gallon March.  As a result, net returns of soy biodiesel product were down $0.05 /gallon, with a loss of $0.04 per gallon produced.  This is comparable to monthly average profits of $0.01-$0.02 /gallon during the January-March 2019 period. 

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Following are some graphics on U.S. Ethanol and Biodiesel Market price and profitability trends in the , which will soon be available on the KSU AgManager website:  http://www.agmanager.info/

The full presentation titled “U.S. Ethanol & Biodiesel Market Situation” made for WILL (Illinois Public Radio) on Tuesday, April 23, 2019 and will be located at the KSU AgManager.info website – at the following web address:

http://www.agmanager.info/grain-marketing/grain-market-outlook-newsletter

 

Following are the graphics of this presentation.

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