Weekly Ethanol Production Steady
- Production for the week ended January 1 was up slightly to 274.9 million gallons from 274.6 million in the previous week.
- Weekly production was 12% lower than last year, and had been averaging 11% below year-ago levels in December.
- Ethanol production will need to average nearly 281 million gallons per week through August to reach USDA's annual corn for ethanol usage forecast.
- Ethanol stocks declined to 978 million gallons last week from 987 million gallons the week prior.
- The stocks decline was the first since mid-October, but they remain at record high levels for this time of year.
- Weekly gasoline demand was 8.5% below last year, compared to the 4-week average of 11.7% lower.
FBN’s Take On What It Means: With corn prices over 6-year highs and weak gasoline demand, ethanol margins remain under pressure, and the near term production outlook remains stagnant. It is probably too early in the season for the USDA to trim its forecast corn usage for ethanol in next week's report, but current trends are pointing in that direction.
Brazil Rains Improve, But Still Erratic
- Brazil’s weather has improved in recent weeks with well-timed rainfall and normal temperatures.
- The spotty rainfall pattern has resulted in some pockets of ongoing dryness not far from areas that experienced improved crop conditions.
- Rainfall was less than half of normal in portions of interior western Mato Grosso, while near to slightly above average rain occurred in other areas.
- Another area of ongoing concern about dryness is in Rio Grande do Sul where rainfall has been 50-80% of normal in the past 30 days.
- Topsoil and subsoil moisture levels are rated as mostly adequate.
- The forecast for the next two weeks is expected to be similar to the past month with some variability in rainfall and temperate conditions.
FBN’s Take On What It Means: Because of the erratic nature of the rainfall, it is going to be very difficult to forecast potential yields and production from many of Brazil’s crop regions, especially after a significant delay in the arrival of rains early in the growing season. The continued risk of missing rains, especially in the south will be supportive of prices.
Iowa Corn Yield Refresher
On Tuesday, USDA will release its revised US corn production estimate. Iowa could be a focal point given the wind storm that passed through the state and potential revisions to the corn yield. In the November report, USDA estimated the yield at 184 bushels/acre but we lean towards a slightly lower yield - perhaps closer to the 180-mark. But, the bottom line for the US is that we do not anticipate a sharp reduction in yields. We do look for a minor trim, which leans supportive, but at this point may not be market moving without other supportive elements.
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