Ethanol Industry Approaches 1 Million Barrels a Day Production
The Barrel is a blog done by Platts (a division of McGraw Hill) and their recent post indicated that Ethanol production is approaching 1 million barrels a day. This equates to about 42 million gallons a day. Ethanol margins have nearly doubled from 2013 and are approaching $1 per gallon.
However, with the continued decrease in crude oil and gasoline prices, these margins will start to erode assuming crude stays low. Gasoline demand has been increasing for several weeks now and is currently at 9.22 million barrels per day. The four-week rolling average of ethanol blending rate is at 9.34% which is well below the dreaded 10% ethanol blend wall.
Continued high ethanol production has led to high profits for ethanol producers (we know many of our farmers with ethanol investments will have income tax issues this year) and this continues to keep corn prices higher than they might otherwise be.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
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