URBANA — Stronger export numbers and lower acreage boosted corn prices since the end of June. Concerns about demand weakness in ethanol production emerged recently. A recovery in economic activity helped ethanol plants ramp up production as gasoline demand increased. However, a resurgence in virus incidences threatens ethanol production over the short run and injects uncertainty into long-run prospects, according to University of Illinois agricultural economist Todd Hubbs.
“Gasoline demand recovered to almost 89% of pre-coronavirus lockdown levels in early July,” Hubbs says. “Despite this positive development, the recovery in demand flattened out over the last few weeks. Gasoline stocks began to recede but still sit substantially above levels usually seen at this time of the year.
“Attempts to reopen the economy hit a snag as the virus spread rapidly around the country after initial hopes saw a rapid opening in many areas. At 8.648 million barrels per day, demand recovered substantially from the low point of 5.311 million barrels per day seen in early April. The path back to normal gasoline demand levels appears stalled. Ethanol production followed this recovery and will feel the implications of flattening gasoline use,” he adds.
Weekly ethanol production increased for the twelfth consecutive week according to the EIA ethanol production report for July 10. Since April 24, ethanol production increased by 394,000 barrels per day to reach 931,000 barrels. Current estimates place production capacity near 88% of normal. Ethanol stocks fell to 20.6 million barrels from the record high 27.7 million barrels on April 17.
“Ethanol production leveling off over the next couple of weeks, as gasoline demand plateaus, appears likely due to an uptick in coronavirus issues in states in the South and West. If production does slow, it places the current estimate for corn use in question. Expanded exports could help the situation,” Hubbs states.
“Ethanol exports saw a drawback as the world locked down. Through May, ethanol exports sit behind last year’s pace by 51 million gallons. If this pace continues through the end of August, ethanol exports will see a second consecutive year of declining totals from the peak of 1.632 billion gallons during the 2016-17 marketing year,” he adds.
Lower exports to Brazil, India, and the Philippines hurt the pace this year, Hubbs notes.
Over the remainder of the marketing year, the USDA estimate requires an additional 706 million bushels of corn use, Hubbs explains. At recent conversion rates, this estimate requires approximately 953,000 barrels per day of production for the remainder of the marketing year.
Ethanol production for the next marketing year contains a massive amount of uncertainty due to the current economic outlook, Hubbs notes. At present, the USDA forecasts corn use for ethanol at 5.2 billion bushels in 2020-21.
“A forecast of this magnitude signals a drop of about 3% for the entire marketing year off of recent use levels unaffected by the economic shock,” he says. “The Energy Information Agency, in the July short term energy outlook, projects ethanol production at 5% lower than pre-coronavirus production levels over the next marketing year.”
After initial lower production levels on par with current totals, a gradual recovery brings production near 1 million barrels per day (up from 710 thousand barrels in 2020 and down from 1.05 million barrels in 2019) through the second quarter of 2021.
“Improving weather prospects and uncertainty about the economic outlook holds the key to corn price developments over the near term,” he concludes. “The importance of ethanol as a corn demand source remains crucial. As we move into the next marketing year, economic activity needs to improve to maintain this fundamental driver of corn prices.”
Mattoon Area Educational Extension Center
1965: The school is housed in the former Humble Oil Co. building on Route 45 on the south side of Mattoon.
General Electric Co.
1950: Proof that flash photography has become a national hobby is the Mattoon plant of the General Electric Co. which manufactures flash bulbs almost exclusively. A few incandescent or regular light bulbs in larger wattages are made here also.
Ellen Kay's
1989: Pat and Rodney Williamson are ready to dine. Owner Leonard Losch looks on at Ellen Kay's.
East Rudy Place
1992: A bicyclist pedals along East Rudy Street where a row of new duplexes were built, next to a subsidized housing project.
E. Rudy Place
1992: A group of children wait in line to challenge the winner to a game of tether ball at the E. Rudy Street housing project.
Downtown Aerial
1985: aerial view of downtown Mattoon.
Douglas Nursing Center
1977: Acquisition of the Douglas Nursing Center will complete another phase in Wesley Tower's total care package.
Consolidated Telemarketing Association (CTA)
1991: The CTA office is carpeted, air conditioned, well-lit and features work stations designed around employee needs. Telemarketers generated $435 billion in sales last year. For each customer who says yes, 99 say no.
Central Illinois Public Service (CIPS)
1959: The Eastern Division of the CIPS is completing a move into the new building in Mattoon. The structure has 36 offices and 23,000 square feet of office space.
Burtschi
1988: Burtschi is the first store in Illinois south of Springfield to offer Hummel figurines.
Blaw-Knox
1963: A new line of paving equipment is exhibited by the Mattoon Blaw Knox plant at the Construction Equipment Exposition and Road Show, Chicago.
Anaconda
1959: In an effort to better serve the growing needs of the Midwest, Southwest and Far West market for flexible metal hose and tubing the American Brass Co. built its American Metal Hose Division plant in Mattoon.
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July 22, 2020 at 07:30PM
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Weekly Outlook: Revisiting corn use for ethanol | Agriculture - Journal Gazette and Times-Courier
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