Chicago Argo ethanol sets record low

Houston — S&P Global Platts benchmark Chicago Argo ethanol assessment touched another record low Monday, the fifth time in three weeks it has reached a new bottom.

Platts assessed ethanol at the Argo terminal -- the dominant trading hub in the US ethanol market -- at 84.80 cents/gal. The previous low was set on March 23, when Argo was assessed at 85.60 cents/gal.

Market sources chalked up the decline to a continuing dread about oversupply and falling demand, rather than a single action or event. "Nobody knows what's going on," said one trader, "except that demand is awful and production needs to come offline."

The coronavirus pandemic has waylaid US ethanol prices for the last month. As the local, state and national governments have asked, or in some cases ordered residents to stay home, the demand for motor gasoline has plummeted.

Federal law requires that ethanol be blended into most motor gasoline blends.

Falling prices have also taken a toll on the ethanol crush margin. On Monday, the margin fell to minus 36.9 cents/gal, almost matching the historic low of minus 37.08 cents/gal on March 23.

The market faces vast uncertainty over how much demand for motor gasoline and ethanol will dry up due to the pandemic. US President Donald Trump earlier this week sought to continue social distancing measures through April 30.

At the same time, ethanol producers entered 2020 with massive ethanol stocks due to sustained production that often outpaced even normal demand.

In response to the dwindling demand, many ethanol producers have curtailed production or shut down plants entirely. Market sources told Platts previously they expect to see evidence of those cutbacks in Wednesday's production and stock data from the US Energy Information Administration.

S&P Global Platts Analytics forecasts that domestic ethanol production will fall 54,000 b/d to 951,000 b/d in Wednesday's report. If so, that would mark the lowest production level since the week of September 5.