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Ethanol Production Steady, Stocks Higher

Russia to start formula-based grain export tax in April

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Ethanol Production Steady, Stocks Higher

  • Ethanol production increased slightly to 936,000 barrels per day from 933,000 in the previous week.
  • Since mid December, production has averaged 937,000 barrels per day, in line with the amount needed to meet USDA's 4,950 million bushel corn usage forecast.
  • Blending demand was down -1%, down slightly due to continued disappointing gasoline offtake.
  • Ethanol stocks surged 30 million gallons to 1.021 billion gallons, up from 991 million the week before.
  • Stocks moved back to record levels for the week, and are at the highest in almost 10 months.
  • There was a large increase of stocks at the Gulf Coast, which may represent supplies moving into position for export.

FBN’s Take On What It Means: Demand was mildly disappointing, and stocks are likely to build seasonally until early March. Margins have improved a bit recently, and the demand outlook improves with warmer weather, the eventual rebound from the coronavirus, and an increase in exports to China.


Russia to Start Formula-Based Grain Export Tax in April

  • Starting April 1, Russia plans to launch a permanent grain export tax program.
  • It is a formula-based levy for grain exports versus the previous fixed tax that was slated to start February 15.
  • Starting April 1, Russia’s grain exporters will have to register contracts for exports and then the tax will be calculated.
  • The formula still is not finalized but currently is being considered as (price per tonne of wheat - $200)*70%, which is inline with the expected tax that was supposed to start for new crop exports.
  • While a floating wheat tax seems inevitable, there also is a chance of formula-based taxes being imposed on barley and corn.
  • Russia continues to deal with rising food costs and is trying various measures to limit further increases.
  • A recent quote for 12.5% protein wheat was at $292.50 per tonne; that translates to a tax around $65 per tonne ($1.77/bushel), which is about $5 higher than the fixed tax would be at 50 euros per tonne.

FBN’s Take On What It Means: Russia continues to face rising food prices, along with the rest of the world, but has so far failed to prohibit domestic prices from further increasing. The government could go as far as further restricting the quantity of exports in the coming months; regardless, this move by Russia is viewed as a positive to other exporters.

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