Ethanol Market and Pricing Data – August 2, 2017

1. Ethanol, Fuels and Co-Product Pricing

Market Outlook: U.S. ethanol prices are higher this week as weekly production and stocks fell. Wholesale rack prices rose in the Midwest, with Kansas and Nebraska leading the way. This supported ethanol futures, which gained 2.4 cents/gallon (0.63 cents/liter) while FOB Houston ethanol prices climbed 3.2 cents/gallon (0.85 cents/liter). Traders are reporting markets have been lightly traded in recent days due to a typical summer decline in trading activity.

Gasoline prices are higher this week across paper and physical markets. Cash RBOB prices are $0.10/gallon ($0.028/liter) higher while RBOB futures rose $0.092/gallon ($0.0242/liter).

USDA reported that 436.7 million bushels of corn were used for fuel alcohol in June, up from 427.6 million last year. The report reflects growing demand for ethanol, especially in the export market. U.S. ethanol exports are up 23 percent YTD in 2017.

Brazil’s tax hike and stronger ethanol demand pushed prices higher this week. After raising taxes on ethanol (see below), ethanol prices rose 4.7 percent in Sao Paulo and FOB Santos prices jumped 0.82 cents/liter to $0.523. Brazil’s ethanol/gasoline price ratio is 67.8 percent versus 66.4 percent last week. Currently, ethanol FOB Santos, Brazil is $0.397/gallon ($0.1048/liter) more expensive than ethanol FOB Houston. Brazil’s market action increased this premium this week.

Brazil: The Brazilian government decided July 28 to reduce a federal tax on ethanol known as PIS/Cofins by 8.55 centavos per liter. The PIS/Cofins tax had just been increased on both gasoline and ethanol a week earlier but producers argue the additional levy on ethanol was illegal. This will make the tax on gasoline over 200 percent higher than the one applied to ethanol and will favor consumption of the latter fuel.

India: India’s transport minister recently petitioned his finance counterpart for a reduction in the 18 percent goods and services tax recently applied to biofuels. The tax reduction is in effort to increase biofuels use in the country and reduce fossil fuel imports. The transportation minister also requested a GST reduction in hybrid vehicles.

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