Plunging corn futures push ethanol crush margin higher

Houston — The US ethanol crush margin on July 13 rose to 34.41 cents/gal, up by 5.16 cents since S&P Global Platts last published its crush margin tracker on July 6.

The crush margin gained due to a sizable decline in corn futures, and a small gain in ethanol prices

Platts assessed Chicago Argo ethanol at $1.5370/gal on July 13, up 70 points since July 6. Argo prices reached a seven-month high on July 8 at $1.6060/gal as thin inventories forced buyers to pay substantial premiums for the biofuel. However, those gains virtually evaporated by July 13.

Front-month CBOT corn futures, on the other hand, slumped 12.5 cents to $3.34/bu, compared to July 6. After seeing a brief rally on July 6 due to concerns about hot, dry weather, the US Midwest saw heavy rains for the latter part the week. The plentiful precipitation eased concerns about the harvest and pulled prices lower.

The crush margin measures the cost of ethanol against the cost of feedstock corn used to produce the biofuel. 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 914,000 b/d for the week ended July 3, an increase of 14,000 b/d, and the tenth consecutive rise, data from the US Energy Information Administration showed July 1.

As per the same report, ethanol stocks rose by 456,000 barrels to 20.620 million barrels, the first build in 11 weeks.

S&P Global Platts Analytics forecasts that production will rise to 947,000 b/d in the upcoming July 15 report.