Ethanol price strength pushes crush margin into positive territory

Houston — The US ethanol crush margin on Tuesday increased to 0.06 cent/gal after rising 2.75 cents since February 10, the last time S&P Global Platts published its crush margin tracker.

Tuesday's margin is only the second in 2020 above zero.

The rally was sparked by an upswing in ethanol prices outpacing corn futures own move higher.

Platts assessed Chicago Argo at $1.3685/gal Tuesday, a 3.35-cent increase compared with February 10.

The front-month corn futures contract rose to $3.83/bushel on Tuesday, 2.25 cents higher than on February 10.

A simple crush margin can be calculated by dividing the cost of corn per bushel by 2.8, the number of gallons of ethanol that a bushel of corn can produce. The resulting number is the cost of corn per gallon of ethanol.

US ethanol production averaged 1.033 million b/d in the week that ended February 7, a decrease of 48,000 b/d, US Energy Information Administration data showed February 12.

Production was up 4,000 b/d year on year, according to the data.

Total stocks, on the other hand, increased 884,000 barrels in the most recent reporting week to 24.358 million barrels.

All of the five defined regions saw an increase in their inventories.

East Coast stocks led all gainers, rising 374,000 barrels, or 3.77%, to end the most recent reporting week with 8.750 million barrels.

Midwest stocks increased 209,000 barrels to 8.458 million barrels. The Midwest is the home to most of the US' ethanol plants, and is a dominant hub for trading the biofuel.

Gulf Coast stocks rose 193,000 barrels, or 4.95%, to 4.092 million barrels. The Gulf Coast is the origin for most ethanol exports from the US, as well as a large consumption hub.

The West Coast region added 108,000 barrels, or 4.52%, to reach 2.659 million barrels, despite the EIA reporting no US imports. Ethanol imports typically flow into California, as imported sugarcane-based ethanol from Brazil generates more value from carbon credits under the state's Low Carbon Fuel Standard.