The U.S. ethanol trade is about to break under the burden of the Trump Administration’s trade conflict with China and the surge in the variety of small refineries eliminated from the nation’s biofuel legal guidelines, said Todd Becker, CEO of Green Plains
The U.S. ethanol sector was preparing for growth in recent years; however, the momentum has hindered in the face of President Donald Trump’s trade conflict with China, a crucial purchaser, and his management’s decision to align itself with the oil trade on demand-cutting waivers from biofuel legal guidelines, Becker mentioned.
The sustained downturn in margins will finally start taking its toll as some producers run out of money and start a host of severity measures to weather the storm.
Trump fulfilled his commitment to lift the summer ban on sales of higher ethanol blends of gasoline; however, the infrastructure had to deliver it requires time to be built. There are around 1,000 retail stores geared up to supply so-called E85 gasoline; however, the trade requires 10,000 stores to boost demand, Becker stated.
U.S. ethanol production in early June reached around 1.1 million barrels per day (bpd), the best seasonally on record, Energy Information Administration data confirmed. While that might seem like good news, margins to produce ethanol ETH-CB-REF are at the weakest seasonally since 2015, based on Refinitiv Eikon information.
Ethanol production dropped 2.5% to nearly 1.04 million bpd, in keeping with the latest weekly EIA data. However, inventories nonetheless grew to almost 23.7 million barrels, the highest for this time of year on record.
One dealer stated production must fall by nearly 10% or demand needs to increase by the same quantity to help offset the market.