Sinking US ethanol price turns crush margin negative

Houston — The ethanol crush margin fell below zero on Nov. 13 for the first time in nearly six months as plunging ethanol prices outpaced a small gain in feedstock corn futures.

The ethanol crush margin fell 5.50 points on Nov. 13 to minus 4.41 cents/gal, falling into the red for the first time since May 20, and reaching the lowest since May 6.

The margin has declined 13.32 cents in the last four trading days.

Falling ethanol prices have cut into the margin. Since Nov. 9, benchmark Chicago Argo ethanol prices have fallen 12.25 cents. S&P Global Platts assessed Chicago Argo ethanol at $1.4220/gal on Nov. 13.

Ethanol prices have been pushed lower by rising production of the biofuel in recent weeks. The US Energy Information Administration's most recent data showed domestic ethanol production reaching 977,000 b/d, the highest level since March.

On the other hand, demand for motor gasoline, with which ethanol is blended, is falling due to not only low seasonal demand, but also falling demand due to the coronavirus and the potential for more related lockdowns across the country.

Corn prices have jumped in the week started Nov. 8 as well. A bearish report from the US Department of Agriculture on Nov. 10 sent corn prices 15.5 cents higher. But a round of profit-taking and technical selling whittled the gain to just 3 cents by Nov. 13.

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.