The US ethanol crush margin tumbled to 18.88 cents/gal Monday, a decrease of 4.56 cents/gal or 19.45% from 23.44 cents/gal on March 10, the date of the last published S&P Global Platts Crush Margin Tracker.
The benchmark Argo ethanol assessment reversed course over the week, turning bearish amid higher production rates.
Weekly US Energy Information Administration data showed production was 1.045 million b/d in the week that ended March 10, 23,000 b/d higher than in the previous week.
Though production rose, inventories retreated for a second consecutive week after two straight months of builds. Stocks fell 90,000 barrels to end the most recent reporting week at 22.766 million barrels. But even though total barrels fell, the Midwest added 41,000 barrels to reach an all-time high of 8.418 million barrels.
The Midwest is the location of the majority of ethanol plants in the US, as well as Kinder Morgan's Argo terminal. With so many barrels at the heart of the ethanol market, prices faltered.
Trade flows with Brazil are also beginning to shift as mills in the key Center-South region come back online. Brazil has been one of the main destinations for US exports for the past several months as high sugar prices have discouraged production in that country.
But now that production is returning, market participants have begun to hear of cargoes being booked for shipment from Brazil to the US.
Brazilian ethanol qualifies as an advanced biofuel under the Renewable Fuel Standard, producing a more-valuable D5 Renewable Identification Number rather than the D6 RIN that US ethanol produces.
Some sources have heard cargoes from Brazil could arrive in California as early as April, with one loading in late March.
Argo was assessed at $1.4870/gal Monday, down from $1.5005/gal on March 10.
The front-month CBOT corn futures contract rose 9 cents to $3.6350/bushel Monday from $3.5450/bu on March 10.
Corn futures continued to find support from ongoing export strength, although they wavered slightly as crops in South America could be larger than expected.
A simple crush margin can be calculated by dividing the cost of corn per bushel by 2.8, the number of gallons of ethanol that a bushel of corn can produce. The resulting number is the cost of corn per gallon of ethanol.
