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US ethanol margin tumbles on Argo's bearish week

The US ethanol crush margin continued to narrow over the past week, sliding to 10.66 cents/gal Monday from 15.64 cents/gal February 26, the last time S&P Global Platts' Crush Margin Tracker was published.

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The benchmark Argo market weakened on some logistical challenges amid thin liquidity. Weekly US Energy Information Administration data also weighed on the market.

S&P Global Platts assessed Argo at $1.4575/gal Monday, down from $1.4725/gal February 26. A weekly EIA report Wednesday gave little direction for the market as stocks moved higher while production fell, but some viewed the lower production as within the average over the past month. The data showed production in the week that ended February 23 slid 24,000 b/d to 1.044 million b/d.

Total stocks climbed modestly. Inventories rose 226,000 barrels week on week to 22.979 million barrels. Total inventories were 112,000 barrels below last year's level, the first time since March 2017 that inventories have been down year on year.

The Gulf Coast led the build as the region added 239,000 barrels. Robust exports continued to flow out of the region, encouraging market participants to move product into the area, raising stocks. Arbitrages to Southeast Asia and Brazil started the year wide open, encouraging a flurry of cargo bookings.

The Midwest also saw a strong stock increase as it added 197,000 barrels to finish the week at its highest level in nearly a year. The Midwest is host to the largest number of ethanol plants out of all the US regions.

Flooding along the Illinois River may have contributed to some logistical difficulties moving product out of the region. Market participants have also said domestic arbitrages have not been open, keeping product in storage within the region.

Corn, meanwhile, ended Monday 9.75 cents higher compared with February 26 at $3.7825/bushel. 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.

--Josh Pedrick, joshua.pedrick@spglobal.com
--Edited by Keiron Greenhalgh, keiron.greenhalgh@spglobal.com