Prospects for U.S. Ethanol Production and Corn Consumption in 2016

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prospects for U.S. Ethanol Production and Corn Consumption in 2016

2015-12-31 11:17 |
source: Game Master

according to Professor Darrell Goode, an agronomist at the University of Illinois at Urbana-Champaign, the consumption demand for conventional ethanol (ethanol produced from corn) in the United States in 2016 may be lower than earlier expected.

According to data from the U.S. Energy Information Administration, the U.S. produced 14.313 billion gallons of fuel ethanol in the 2014 Gregorian calendar year, an increase of 1.02 billion gallons from 2013 and 0.384 billion gallons higher than the previous historical record set in 2011. U.S. energy information administration data show that in the first nine months of 2015, the United States ethanol production increased by 3.6. In addition, ethanol production in October and November this year was 3.1 percent higher than a year earlier. December's output is likely to be slightly below the monthly record of 1.295 billion gallons set a year earlier. For all of 2015, ethanol production is likely to increase by at least 3 percent over the previous year, to 14.745 billion gallons, which would require 5.25 billion bushels of feedstock, mostly corn.

Based on the U.S. Energy Information Administration's fuel ethanol production, imports, exports, and changes in domestic inventory levels, U.S. domestic ethanol consumption data can be calculated. Ethanol consumption reached a record 13.444 billion gallons in 2014, of which 13.353 billion gallons were conventional ethanol. Consumption in the first nine months of this year is up 4% from a year earlier, and at that rate, the annual consumption will reach 13.982 billion gallons, 13.897 billion of which is conventional ethanol.

Domestic ethanol consumption in the coming year will be affected by two related factors. The first is the renewable fuel consumption standard from 2014 to 2016 issued by the U.S. Environmental Protection Agency on November 30, requiring biofuel consumption to reach 18.11 billion gallons in 2016, 1.18 billion gallons higher than in 2015 and 0.71 billion gallons higher than the preliminary standard set in May. The standard for advanced biofuels was set at 3.61 billion gallons, 0.73 billion gallons higher than the 2015 standard and 0.38 billion gallons higher than the preliminary standard. The demand for conventional biofuel (ethanol) can be estimated by subtracting the demand for advanced biofuel from the biofuel usage target. The demand for conventional biofuel in 2016 was 14.5 billion gallons, up from 14.05 billion gallons in 2015 and 14 billion gallons in 2016.

The second factor affecting domestic ethanol consumption in the United States is the scale of gasoline consumption. Based on the forecast of the U.S. Energy Information Administration, gasoline consumption will reach 139.38 billion gallons in 2015 and 139.96 billion gallons in 2016, which means that after an increase of 2.9 billion gallons in 2015, it will increase by 0.58 billion gallons in 2016. If the blending ratio is 10%, that is, E10 ethanol, the conventional ethanol consumption in 2016 will be only 13.996 billion gallons, which is lower than the 14.5 billion gallons of conventional ethanol demand in 2016 calculated above. This shows that the consumption of E10 fuel may increase slightly, while the share of E15 and E85 with higher blending ratio in the US fuel supply will increase. In other words, if the 2016 gasoline consumption forecast is accurate, the E10 blending wall will be 13.996 billion gallons. Since some gasoline consumption is not blended with ethanol, and some gasoline consumption is blended with a higher proportion of ethanol, the efficiency of E10 blending wall can be regarded as 13.856 billion gallons, accounting for 9.9 of the total gasoline consumption. High-grade ethanol will account for a proportion of the 13.856 billion-gallon consumption, including cellulosic ethanol, but mainly imported from Brazil. The U.S. Environmental Protection Agency expects only 85 million gallons of high-grade ethanol consumption in 2015, of which 70 million gallons will be Brazilian ethanol. That consumption will increase to 0.249 billion gallons in 2016 as California changes fuel standards and the United States imports more Brazilian ethanol. This would reduce the conventional E10 blended wall to 13.607 billion gallons. Some ethanol will be consumed at high blending rates, primarily E85, I .e., gasoline blended with 85% ethanol. The U.S. Environmental Protection Agency expects 2016 E85 consumption to be 0.4 billion gallons, which is equivalent to 0.296 billion gallons of ethanol if the average blending rate is 74%. Conventional ethanol consumption will reach 13.903 billion gallons, roughly the same as in 2015.

If the import of ethanol in 2016 is close to the level of 2015, there will be no change in the level of ethanol inventory in 2016. The domestic consumption level of conventional ethanol in 2016 indicates that the demand for conventional ethanol in 2016 will be equivalent to that in 2015. This result is very different from the original expectation that the increase in the biofuel consumption target in 2016 will cause a significant increase in corn demand in the conventional ethanol industry. There are two reasons for the more conservative level of domestic conventional ethanol consumption expectations in 2016. First, domestic gasoline consumption forecasts are conservative. Given the continued slump in gasoline prices, a more plausible scenario may be that gasoline consumption will be about 2 billion gallons higher than currently expected by the U.S. Energy Information Administration. Second, ethanol import expectations may be too high, depending on how California's fuel policy is implemented. On the other hand, the U.S. Environmental Protection Agency's E85 fuel consumption forecast for 2016 may be somewhat too high. Domestic conventional ethanol consumption in 2016 could be 0.2 billion gallons higher than expected, requiring an additional 70 million bushels of feedstock. Nevertheless, feedstock consumption is likely to be slightly higher than in 2015. A significant increase in raw material consumption will require a significant increase in domestic gasoline consumption, a significant increase in ethanol blending and an increase in ethanol exports.