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Corn market finds support in ethanol production

Photo by Ben Nuelle

Ethanol demand destruction has wreaked havoc across farm country.

After months of low crush margins, the corn market finally found support.

Ethanol production recorded a good week, according to Zaner Ag Hedge market strategist Brian Grossman.

“We have production up (and) stocks down. The profit margin did slip a little, but the biggest aspect here was a high weekly crush. Sixteen-point-eight million bushels got ground for ethanol last week, above our weekly target – something we haven’t been seeing up until the last few weeks,” Grossman said.

Ethanol production for the week ending May 3 expanded 12,000 barrels per day (b/d), a 1.2-percent increase. The Renewable Fuels Association (RFA) also reports the four-week average ethanol production rate moved 0.9-percent higher to 1.031 million b/d.

Ethanol production helped support the corn market, by providing much needed demand.

“Corn is desperate for demand at this point,” Grossman said. “Corn for ethanol has been under pressure. The EPA keeps signing waivers to refineries, allowing them to side-step the RFS. For a couple of months, we were consistently missing the weekly target. During that period, we saw USDA lower their corn for ethanol target from 5.65 billion bushels to 5.5 – 150 million bushels back on the balance sheet, which should have been going to ethanol.”

The World Agricultural Supply and Demand Estimates (WASDE) report, to be released at 11 a.m. CST Friday, does not look bullish for corn. Grossman says it does have the potential to bring “more of a seasonal tendency back to the market.”

“The estimates are out,” Grossman said. “Corn – The ‘19/’20 average trade ending stock is 2.13 billion bushels, with the highest trade estimate being shy of 2.4 billion (bushels). There’s nothing on here that’s going to be screaming ‘bullish,’ but it’s not a number we haven’t seen before, not already expecting. We can only be bearish on it for so long. Look for more of a seasonal tendency to come back to the market.”