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.

U.S. Ethanol and Biodiesel Market-Profitability Graphics — Breakeven Operations But Flooding Disruptions in Places

Ethanol Price and Profitability Trends Through Late March 2019

By Kansas State University estimates, ethanol plants in Iowa and other Midwest states were operating at losses of $0.10 to $0.29 per gallon from September 2018 through February 2019, but were showing losses of $0.14 / gallon during the first three weeks of March 2019. A moderate increase in ethanol prices in March is the key factor causing the moderation in losses.

During the March 1-22, 2019 period, corn input purchase prices for Iowa ethanol plants averaged $3.53 3/4 /bu (compared from $3.57 /bu in February, and $3.54 in January).  Selling prices of distillers dried grains (DDGS) (10% moisture) have averaged $136.78 /ton during the March 1-22 period, down from $155 & $140 /ton in January and February, respectively). The selling price of ethanol via tank car and truck shipment out of Iowa ethanol plants has averaged $1.31 /gallon, up from $1.17 & $1.21 /gallon in January & February, respectively.

During March 1-22, 2019, the estimated cost of production of a representative ethanol plant in Iowa has averaged $1.45 per gallon – comparable to $1.42 per gallon in January and $1.47 in February.  This has lead to an estimated negative net return of minus $0.14 per gallon produced so far in March 2019, with is comparable to losses of $0.24 /gallon in January and losses of $0.26 /gallon in February 2019.

 

Biodiesel Price & Profitability Trends Through Late-March 2019

Reductions have also occurred in the estimated profitability of Biodiesel plants in Iowa and nearby states – although they are still estimated to have in essence broken even during the March 1-22, 2019 period.

During March 1st to 22nd, soybean oil input purchase prices for Iowa biodiesel plants averaged $29.49 per cwt – down from $30.11 /cwt in February.   This occurred while Biodiesel selling prices averaged $2.90 /gallon during 3/1-22/2019, being down from $2.96 /cwt in February.

Also during the March 1-22 period, the cost of production at representative biodiesel plants in Iowa has averaged $2.90 per gallon – down from $2.84 per gallon February.  As a result, net returns of soy biodiesel product were level, or breakeven, with a profit of loss of $0.00 per gallon produced.  This is comparable to profits of $0.02 /gallon in February, and breakeven in January. 

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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, March 26, 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.

   

2019 USDA Outlook Forum – “Grain and Oilseeds Market Outlook for 2019” (February 22, 2019)

The USDA is holding their 2019 Agricultural Outlook Conference in Arlington, Virginia on February 21-22, 2019.  On Friday morning of the conference the USDA provides its “Grain and Oilseeds Market Outlook for 2019”.  This report is prepared by members of the
Wheat, Feed Grains, Rice, and Oilseeds Interagency Commodity Estimates Committees in the U.S. Department of Agriculture

The public will be able to access this information at the following web address:

https://www.usda.gov/oce/forum/2019/At-A-Glance.htm

Following is the actual USDA Report of “Grain and Oilseeds Market Outlook for 2019”.

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Agricultural Outlook Forum 2019

Released: Friday, February 22, 2019

GRAINS AND OILSEEDS OUTLOOK FOR 2019

Prepared by Members of the Wheat, Feed Grains, Rice, and Oilseeds Interagency Commodity Estimates Committees   (This paper includes contributions from the World Agricultural Outlook Board, the Economic Research Service, the FPAC-BC, and the Foreign Agricultural Service.)

U.S. Department of Agriculture

Planted Acreage Outlook for 2019 (Table 1)

This paper provides USDA’s projections of 2019/20 U.S. supply, demand and prices for wheat, corn, rice, soybeans and soybean products. Projections presented in this paper include implications of the February 8 NASS Winter Wheat and Canola Seedings report, which estimated winter wheat area declined 4 percent to the lowest level since 1909. The projections assume normal weather conditions for spring planting and summer crop development, and the continuation of tariffs by China on a number of U.S. agricultural products. These forecasts will be updated in the May 10 World Agricultural Supply
and Demand Estimates (WASDE) report. The May WASDE will incorporate farmers’ 2019 planting intentions as indicated in the March 29 NASS Prospective Plantings report and survey-based forecasts for winter wheat production, as well as global, country-by-country supply and demand projections.

Among the 3 major crops, this year’s outlook represents a dramatic change from prior years because of China’s imposition of tariffs on U.S. soybeans. Relative to a year ago, soybean cash prices have declined, with pronounced weakness in the Northern Plains and Western Corn Belt, two areas that are particularly exposed to variations in the export market. In contrast, soybean cash prices have shown relative strength in the Eastern Corn Belt. Offsetting a forecast decline in soybean acres are increases in spring wheat, corn, and cotton acres. The total of 3-crop plantings, at 224 million acres, would be down 2.1 million from final plantings in 2018. This largely reflects expectations of a return to a more typical level of prevented plant acres. Season-average corn prices received by producers are expected to reach $3.65 per bushel, up 5 cents from the 2018/19 forecast. Soybean prices are expected to rise to $8.80 per bushel while wheat prices are up to $5.20.

Wheat Supply, Demand, and Price Outlook for 2019/20 (Table 2)

The 2019/20 outlook for U.S. wheat is for reduced supplies, minimally lower use, and decreased ending stocks. U.S. wheat production is projected 1 percent higher from 2018/19 at 1,902 million bushels despite the NASS Winter Wheat and Canola Seedings report showing 2019 winter wheat planted area at the lowest level since 1909. Higher expected net returns for spring wheat compared to soybeans in the Northern Plains is anticipated to result in greater spring wheat plantings in 2019 with total wheat acreage projected at 47.0 million acres, down 2 percent from last year. The all-wheat yield for 2019/20 is projected slightly up from the previous year to 47.8 bushels per acre and is based on a linear trend. The higher yield coupled with increased harvested area at
39.8 million acres offsets reduced planted area to raise 2019/20 production from last year. Lower carryin stocks are still expected to result in reducing 2019/20 supplies by 2 percent to 3,052 million bushels.

Projected 2019/20 total use is down only slightly from a year earlier. Domestic use is up 2
percent, primarily due to modest increases in both food and feed and residual use to 1,133 million bushels. The higher domestic use is more than offset by lower projected exports for 2019/20 to 975 million bushels. Greater export competition is seen from Australia and the EU in 2019/20 as both recover from last year’s drought. Although 2019/20 total use falls slightly, reduced supplies will result in ending stocks declining by 7 percent to 944 million bushels. While stocks remain burdensome, stronger export competition is expected to result in a modestly higher season-average farm price (SAFP) at $5.20 per bushel, compared to the 2018/19 SAFP midpoint price of $5.15.

Corn Supply, Demand, and Price Outlook for 2019/20 (Table 3)

The U.S. corn outlook for 2019/20 is for increased production, domestic use, and exports, and lower stocks. The corn crop is projected at 14.9 billion bushels, 3 percent above a year ago as an increase in area more than offsets a lower yield. The yield projection of 176.0 bushels per acre is based on a weather-adjusted trend assuming normal planting progress and summer growing season weather. Despite beginning stocks that are forecast down from a year ago, total corn supplies are up slightly on a larger crop.

Total U.S. corn use in 2019/20 is forecast to rise 1 percent from a year ago on increases to domestic use and exports. Food, seed, and industrial (FSI) use is projected unchanged at 7.0 billion bushels. Corn used for ethanol is unchanged from a year ago, based on expectations of flat motor gasoline consumption and a slight decline in ethanol’s inclusion rate into gasoline that is essentially offset by continued growth in exports. Feed and residual use is up 125 million bushels to 5.5 billion, with a larger crop and continued growth in grain consuming animal units. Corn exports are up 25 million bushels to
2.5 billion, reflecting expectations of modest growth in global trade and a slight decline in U.S. market share with competition from other exporters. Ending stocks are projected at 1.7 billion bushels, down 5 percent from 2018/19, supporting a 5 cent per bushel increase from a year ago in the expected season-average farm price to $3.65 per bushel.

Rice Supply, Demand, and Price Outlook for 2019/20 (Tables 4 & 5)

The 2019/20 outlook for U.S. rice is for reduced production, increased use, and lower ending stocks.  U.S. rice production is projected at 203 million cwt, down 9 percent from 2018/19. All of the production decrease is for long-grain as combined medium- and short-grain production increased nearly 2 million cwt. Rice planted area for 2019/20 totals 2.66 million acres, down 290,000 acres from the previous year. The long-grain area projection is down 300,000 acres but combined medium- short-grain rice is projected slightly higher. The all rice yield is projected up slightly from the previous year on byclass
trend analysis. Imports are projected to increase 0.3 million cwt to another record; aromatics are expected to continue to account for the bulk of U.S. rice imports. led especially by aromatic rice imports from Asia. Total 2019/20 U.S. rice supplies are down 3.2 million cwt from the previous year to 278.9 million cwt.

Total 2019/20 use is up 2 million cwt to 237 million all on higher exports, which are now projected at 102 million cwt. Long-grain accounts for the entire year-over-year export increase. Ending stocks for 2019/20 are down 5.2 million cwt from the previous year and below the 5-year-average of 43.5 million cwt. The all rice season average farm price is up $0.10 per cwt from the midpoint of the previous year to $12.20.

Soybean Supply, Demand, and Price Outlook for 2019/20 (Tables 6, 7 & 8)

The 2019/20 outlook for U.S. soybeans is for record supplies, higher crush and exports, and lower ending stocks. Soybean supplies are projected at 5.1 billion bushels, up 2 percent from 2018/19 with higher beginning stocks more than offsetting lower production. Soybean production is projected at 4.2 billion bushels, 8 percent below last year on lower harvested area and trend yields. The national average soybean yield of 49.5 bushels per acre is 2.1 bushels below last year. The yield forecast is based on a weather-adjusted trend assuming normal growing season weather.

Soybean domestic use is projected at 2.2 billion bushels, up 1 percent on higher crush. Crush is projected at a record 2.1 billion bushels as higher domestic use of soybean meal more than offsets lower exports. Lower soybean product exports reflect a recovery of Argentina’s crop after last year’s drought.  Soybean crush margins remain relatively strong with higher soybean prices mostly offset by small gains for soybean meal and soybean oil prices. Soybean meal prices are forecast at $320 per short ton.  Domestic use of soybean oil is projected up 2 percent for 2019/20 on gains for edible oil and biodiesel consumption. With lower projected soybean oil exports, soybean oil ending stocks for 2019/20 are projected at 2.04 billion pounds, down 3 percent from 2018/19. Soybean oil prices are forecast at 30.5 cents per pound, up slightly from 2018/19.

Soybean exports for 2019/20 are projected at 2.03 billion bushels, up 150 million from the 2018/19 forecast. With rising global demand and reduced supplies in Brazil this fall, some recovery in U.S. exports is expected despite continued import duties assumed for U.S. soybeans in China.

Soybean ending stocks for 2019/20 are projected at 845 million bushels, historically high, but down 65 million from 2018/19. With a smaller harvest and a 4 percent increase in total soybean disappearance, the ending stocks-to-use ratio is projected at 19.8 percent, down from 22.2 percent in 2018/19. The soybean season-average farm price is projected at $8.80 per bushel, up 20 cents from 2018/19.

Image result for usda agricultural outlook forum 2019

Ethanol and Biodiesel Plant Profitability Turn Lower (U.S. Ethanol and Biodiesel Market-Profitability Graphics)

Ethanol Price and Profitability Trends Through Late-November 2018

By Kansas State University estimates, ethanol plants in Iowa and other Midwest states have continued to operate below breakeven during September and October, and to date in November 2018.  This follows from continued weakness in the selling price of ethanol.

During the November 1-23, 2018 period, corn input purchase prices for Iowa ethanol plants averaged $3.32 1/2 /bu (up from $3.17 /bu in September and $3.29 /bu in October).  Selling prices of distillers dried grains (DDGS) (10% moisture) have averaged $132.35 /ton during the November 1-23 period, up from $131.11-$131.30 /ton in September-October. The selling price ethanol via tank car and truck shipment out of Iowa ethanol plants has averaged $1.23 /gallon, up modestly from $1.22 & $1.21 /gallon in September-October, respectively. .

During this period, the cost of production at representative ethanol plants in Iowa has averaged $1.35 per gallon – up from $1.30 per gallon in September and $1.34 in October.  This has lead to an estimated negative net return of minus $0.12 per gallon produced so far in November, with is comparable to losses of $0.08 /gallon in September and losses of $0.14 /gallon in October 2018.

 

Biodiesel Price & Profitability Trends Through Late-November 2018

Reductions have also occurred in the estimated profitability of Biodiesel plants in Iowa and nearby states – although they are still estimated to have in essence broken even during the November 1-23, 2018 period.

During November 1st to 23rd, soybean oil input purchase prices for Iowa biodiesel plants averaged $28.83 per cwt – up from $28.42 /cwt from September and from $29.92 /cwt in October.   This occurred while Biodiesel selling prices averaged $2.84 /gallon during 11/1-23/2018, being down from $3.05 /cwt in September and $3.00 /cwt in October.

During the November 1-23 period, the cost of production at representative biodiesel plants in Iowa has averaged $2.84 per gallon – up from $2.82 per gallon in September, but down from $2.94 in October.  As a result, net returns of soy biodiesel product turned marginally negative, down to a loss of $0.01 per gallon produced – down significantly from an estimated profit of $0.23 per gallon in September and a profit of $0.06 /gallon in October 2018.

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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, November 27th 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.

Iowa Ethanol and Biodiesel Trend Estimates in Prices and Profitability

Ethanol Market & Price Trends during Early-Mid October 2018

By Kansas State University estimates, Iowa ethanol plants have declined in profitability to date in October 2018.  This follows from declines in both the selling prices of ethanol and distillers grains since the beginning of the month, and increased cost of corn purchases going into Iowa ethanol plants.  During the October 1-19 period, corn input purchase prices for Iowa ethanol plants averaged $3.28 /bu (up $0.108 /bu from September), distillers dried grains (DDGS) (10% moisture) selling prices averaged $130.56 /ton (down $0.55 /cwt), and ethanol tank car and truck selling prices at Iowa ethanol plants averaged $1.21 /gallon (down $0.014 /per gallon from September).

During this period, the cost of production at representative ethanol plants in Iowa has averaged $1.34 per gallon – up from $1.30 per gallon in September.  This has lead to a negative net return of minus $0.13 per gallon produced – down from an estimated loss of $0.08 per gallon in September 2018.

Biodiesel Market & Price Trends in Early-Mid October 2018

Reductions have occurred in the estimated profitability of Iowa Biodiesel plants – although they are still estimated to have covered costs during the October 1-19 period.   During the October 1-19 period, soybean oil input purchase prices for Iowa biodiesel plants averaged $30.11 per cwt (up from $28.42 /cwt from September), while Biodiesel selling prices averaged $3.00 /gallon (down $0.05 /per gallon from September).

During this period, the cost of production at representative biodiesel plants in Iowa has averaged $2.95 per gallon – up from $2.82 per gallon in September.  This has lead to a positive net return of $0.05 per gallon produced – down significantly from an estimated profit of $0.23 per gallon in September 2018.

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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” was made for WILL (Illinois Public Radio) as supporting reference information for a program to that will be aired on Monday, October 22nd.  This presentation 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.

 

U.S. Ethanol and Biodiesel Market-Profitability Graphics: Through 9/2/2018

In August 2018 ethanol plants in Iowa (and by proxy – in the U.S.) are estimated to have been marginally under breakeven for the first time since March 2018, with small losses of approximately $0.01 /gallon.   Iowa ethanol prices estimated to have averaged $1.33 /gallon in August – down from the “tight” range of $1.40-$1.43 /gallon for March-July.  Distillers grains prices averaged near $129 per ton in August, up from $110 /ton in July, but still down from the range of $147-$175 in March-June.  Ethanol plant profits would have been much lower but for a continuation of lower corn input prices – estimated to have averaged $3.29 /bu – up from $3.21 /bu in July, but down from the range of $3.39-$3.70 /bu during March-June.  Given the sizable increase in U.S. ethanol stocks to record levels late summer levels that has occurred, it is somewhat surprising that U.S. / Iowa ethanol prices and ethanol profitability have remained as positive as they have in the summer of 2018.

By KSU estimates using an Iowa Biodiesel plant profitability model from Iowa State University Extension, U.S. / Iowa Biodiesel profitability has continued to be profitable, continuing an 8 month period (since January 2018) of positive, sizable returns over cost.  With Iowa Biodiesel prices estimated to have risen to $3.25 in August (up from $3.01 in July, and up from the range of $3.09-$3.22 during March-June, and with an estimated breakeven cost of $2.81 in August, estimated profits for the month in, U.S.-Iowa soy biodiesel profits are forecast to be plus $0.44 per gallon.  This would be up from estimated Iowa Ethanol Plant profits ranging from $0.16-$0.28 per gallon during March-July 2018.

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 Monday, September 2, 2018 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.

 

 

U.S. Ethanol and Biodiesel Market-Profitability Graphics: Through Late-July 2018

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 Friday, July 27th 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.