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Lower prices drive down US ethanol crush margin

Houston — The US ethanol crush margin fell 77 points to minus 9.63 cents/gal Monday from minus 8.86 cents/gal on January 22, the last time S&P Global Platts published its crush margin tracker.

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Ethanol production dropped last week, following the previous week's large increase. Meanwhile, corn futures edged up slightly.

S&P Global Platts assessed Argo at $1.26/gal Wednesday, down from $1.2650/gal on January 22.

A weekly Energy Information Administration report released January 24 showed US ethanol production averaged 1.031 million b/d in the week that ended January 18, down 20,000 b/d on the week and down 2.92% on the year.

Total stocks rose 150,000 barrels or 0.64% on the week to 23.501 million barrels, with three of five regions showing builds. The weekly stock increase was lower than market expectations.

Inventories were 299,000 barrels lower on the year.

Gulf Coast inventories dropped 212,000 barrels. The Gulf Coast is the most common origin for ethanol exports from the US.

East Coast inventories rose 192,000 barrels or 2.63% to 7.486 million barrels.

Midwest inventories rose 198,000 barrels or 2.49%. The Midwest is host to the largest number of ethanol plants across all US regions.

West Coast stocks shed 37,000 barrels as the EIA again reported no imports on the week, for the 10th week running.

The West Coast is the most common destination for imports as Brazilian sugarcane-based ethanol benefits from both D5 RINs and Low Carbon Fuel Standard credits.

The crush margin's fall was aided by higher corn prices. The front-month corn futures contract settled at $3.7975/bushel Monday, up 75 points from January 22.

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.

-- Wesley Swift, wesley.swift@spglobal.com

-- Edited by Derek Sands, newsdesk@spglobal.com

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