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US ethanol crush margin recovers from negative territory on Argo rally

The US ethanol crush margin remained positive Thursday as it recovered from the first dip into negatives since early 2016.

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It rose to 2.30 cents/gal Thursday from 1.72 cents/gal on Wednesday. The margin fell as low as minus 0.23 cent/gal on Monday.

The recovery was largely due to a bullish number in the US Energy Information Administration's weekly ethanol production and stock data.

Though the total production and stock numbers in the weekly EIA data were only modestly lower, a draw in Midwest inventories bolstered prices.



The Midwest hosts most of the ethanol plants in the US and Kinder Morgan's Argo, Illinois, terminal, the busiest hub of ethanol trade in the US.

Stock levels in the region and in the terminal have been high for several weeks with two consecutive weeks of increases before a 282,000 barrel fall in the week ended December 15.

Inventories in the region did remain 1.546 million barrels higher than the same week last year, but the reduction in inventories provided some breathing room for prices.

Those high stocks in Argo were the initial catalyst for sending the crush margin plunging.

The S&P Global Platts Argo assessment fell to a 12-year low of $1.2370/gal on December 15 from $1.3350/gal on December 8.

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 Derek Sands, derek.sands@spglobal.com