Corn & Ethanol Market Update

The USDA's most recent Crop Report showed lower corn ratings and as the markets digested this, futures prices inched higher overnight. Yield estimates for 2021 will be released in the next few days as markets prepare for next week’s August WASDE report. This will provide a first look at USDA’s early production forecasts for the 2021/22 marketing year.​

​​The USDA has quite a challenge in trying to calculate these early yield figures, especially with so much time left in the growing cycle. August estimates historically align with January final tallies, though large shifts are not unusual as evidenced in last year’s revisions.

There is also a strong probability that Brazilian corn exports will fall dramatically this month with trade forecasts showing exports of 118 million bushels of corn in August, down from 264 million bushels the same time a year ago. This is a result of the La Niña-induced drought this year that has left Brazilian corn production tight and not able to fulfil strong export demand. Brazil’s top corn customers include Egypt, Vietnam, Taiwan, and Iran. These countries will likely be forced to turn to other supplies in the U.S. or Black Sea region in light of Brazil’s corn shortage.

Weekly ethanol production data will be released today and there is a strong probability that this won't be greater than the 42.5 million – 44.8 million gallon/day mark. Last week’s report saw weekly output volumes shrink over 1% to 42.6 million gallons/day as stockpiles rose on flat consumer gasoline demand. Weekly ethanol stocks rose 1% last week to 955 million gallons which is the highest stockpile since the cold snap in mid-February. Weekly gasoline usage averaged 392 million gallons/day for the week ending July 23rd, which is in line with the 356 million – 398 million gallon/day, weekly range in which Americans have been purchasing gasoline this summer.

Last week's report provided a glimmer of hope for the ethanol industry in that ethanol blending by refiners increased 2.5% on the week to 39 million gallons/day. If today’s report shows an increase in blending volumes, even a small increase, then the  future maybe a little bit brighter for ethanol and corn producers across the U.S.

However, the ethanol industry is largely dependant on drivers and what driving activity looks like coming out of the pandemic, particularly in the summer period. Ethanol is increasingly dependant on gasoline consumption breaking out of the current summer usage range to raise ethanol prospects for corn growers.