US ethanol margins driving record production

An ethanol plant in Iowa, US (Flickr/Fredd Thompson)
An ethanol plant in Iowa, US (Flickr/Fredd Thompson)

The Energy Information Administration (EIA) in the US is anticipating consistent growth in ethanol production and consumption through 2019 thanks to mandated production under the Renewable Fuel Standard and stable corn prices.

In its newest Short-Term Energy Outlook, the EIA is projecting continued growth in ethanol production and limited export growth through 2019, with the average ethanol-gasoline blend in the US rising to 10.3%. The agency estimated the average blend in 2017 to be over 10.1%.

The EIA notes in its analysis that although the most common ethanol-gasoline blend is 10% (E10), low ethanol prices and increasing production targets mandated under the EPA’s Renewable Fuels Standard have made ‘favourable’ conditions for higher blend like E15 and E85.

US ethanol prices show consistent margins of 20 cents per gallon over the last five years, helping to keep ethanol production consistent throughout that period. The US produced about 1 million barrels of ethanol per day in 2017, making it the fifth consecutive year of record annual production.

These estimated production margins are derived from modelling based on a dry mill corn ethanol plant of average capacity located in the Midwest, the location for over 90% of the US’ ethanol production capacity. The biggest expense for these facilities is corn, profits being highest when corn is abundant and cheap and when demand for ethanol to blend with gasoline is high. Since 2015 the price of corn has been relatively stable, ranging from $3.40 and $4.00.

See the original press release here.

An ethanol plant in Iowa, US (Flickr/Fredd Thompson)