US ethanol production rises, stocks build as corn demand grows

US ethanol production rose in the week ending February 2 to average 1.057 million barrels a day, data from the EIA showed Wednesday, providing further fuel for analysts who anticipate a revision of corn-to-ethanol consumption figures in Thursday's WASDE.

The increase saw a further 17,000 barrels of daily production added and takes implied corn consumption to nearly 111 million bushels over the week, basis 2.8 gallons produced per bushel.

That was in line with most analyst expectations, which set a range of between 1.04 and 1.065 million barrels, and was up 2,000 barrels a day on the same point in 2017.

It means US ethanol production remains well on track to surpass the USDA’s estimate of 5.525 billion corn bushels heading into ethanol production in the 2017/18 marketing year.

Stock levels have also increased, however, with 23.5 million barrels in tank, a rise of 2% on the stocks held at the end of the previous week, and fractionally higher than most analyst guesses. 

Exports and domestic demand have provided a supportive environment for ethanol production, with margins remaining reasonably positive through what is typically a quieter spell for US demand.

That has ensured US production has held above the 1 million barrel per day level through all but the first week of 2018, leading some industry observers to anticipate the USDA revisiting its corn-to-ethanol figures.

"With the September to December ethanol grind up 3.4% year-to-year… a decent case could be made to boost grind by 25 million bushels," Kelly Herrick of Advanced Trading said in a research note.

The USDA will release the February edition of the WASDE report on Thursday – the same day that US politicians will debate further funding for the US government in an attempt to stave off a second shutdown of the Trump administration.