According to the Energy Information Administration (EIA) in a June 8, 2020, report, U.S. fuel ethanol production fell dramatically during late March and in April 2020, driven by significant reductions in motor gasoline demand as a result of mitigation efforts for the 2019 novel coronavirus disease (COVID-19). “Fuel ethanol production fell to 537,000 barrels per day (bpd) in the week ended April 24, 2020, which was the lowest level on record since June 2010, when the EIA began collecting weekly fuel ethanol production data. Because almost all finished motor gasoline sold in the United States is blended with 10% ethanol (E10), the drop in gasoline demand drove similar decreases in fuel ethanol demand, and correspondingly, fuel ethanol production,” noted the EIA.
As of April 2021, ethanol production has recovered to approximately 90% of pre-pandemic levels or 950,000 bpd. That means increased production created the need for cash corn, and as futures corn prices rose, so did the basis, causing the overall cash price to surge as ethanol plants bid for old-crop corn in additions to feeders and exporters.
Here’s a sampling of what the spot yellow cash corn price has done at various ethanol plants using daily data from the USDA. In the Eastern Corn Belt, representing plants in Illinois, Indiana, Ohio and Michigan, the truck cash price for April 30 was $6.78 versus $6.24 one week ago and $2.97 one year ago. In Nebraska, the truck cash price for April 30 was $6.67 versus $6.11 one week ago and $2.79 one year ago. In Iowa, the truck cash price for April 30 was $6.38 versus $6.02 one week ago and $2.49 one year ago. In South Dakota, the truck cash price for April 30 was $6.70 versus $6.14 one week ago and $2.60 one year ago.
So, the million-dollar question is: Will we run out of old-crop corn to fill the needs of all interested parties? In an April 23 article, “How Tight Are US Corn Supplies?” DTN Lead Analyst Todd Hultman addresses that subject:
Meanwhile, besides the rising futures prices, the basis is responding with a resounding “yes,” as corn supplies are tight amid the nonstop demand.
Just how high can these prices go? Stay tuned.
Mary Kennedy can be reached at email@example.com
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