Ethanol price in US Southeast falls amid high production and stocks

24.01.2017

The price of ethanol in Southeast trading hubs such as Atlanta, Georgia, has tumbled amid record-high production and climbing stocks, sources said Monday.

"We see this every winter as production is typically high while domestic demand is at its low point," said one source. "Domestic demand for January is by far the lowest demand month and most of it is due to poor demand for the first two weeks of January."

Another source said that hubs in the Southeast are trading near a 2-cent premium to the Chicago market, the busiest hub of ethanol activity in the US. The region typically trades closer to a 10-cent premium.

The front-month Chicago ethanol swap was indicated at $1.48/gal Monday. US ethanol production climbed to another all-time high of 1.054 million b/d in the week ended January 13, according to Energy Information Administration data. The previous record was 1.049 million b/d set in the previous week.

The record production rates have created some oversupply in the market, with inventories adding more than 1 million barrels in each of the past two weeks.

Stocks in the week ended January 13 added 1.106 million barrels to finish with 21.115 million barrels total.

The amount of product in the market has pushed some market participants to sell at lower prices, especially if they have too much ethanol in storage, said another source.

When production is high, the Chicago market can end up oversupplied and market participants look to move ethanol to other hubs.

"Basically, excess production gets put on rail cars and sent out," said the first source. "Houston and Dallas, Texas; Doraville, Georgia; and New York Harbor are big rail car homes east of the Rockies."


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