1. Ethanol, Fuels and Co-Product Pricing
Market Outlook: U.S. ethanol prices are lower this week as Hurricane Harvey takes its economic toll. The storm is temporarily shutting down refineries along the Gulf, which is boosting gasoline prices (RBOB futures are up $0.197/gallon, $0.4723/liter, this week). In response, ethanol futures are lower to boost blenders’ margins and encourage production. CBOT ethanol futures fell 5.9 cents/gallon this week (1.56 cents/liter) while FOB Houston cash ethanol fell 3.25 cents/gallon (0.859 cents/liter).
The shutdown of U.S. Gulf refineries sparked a sharp rally in “aromatic” octane enhancer prices (i.e., prices for benzene, toluene, and xylene) as concerns over tightening supplies mounted. For the week, FOB U.S. Gulf benzene prices rose $0.155 cents/gallon ($0.04/liter), or nearly 6 percent. Similarly, toluene prices rose 4.7 percent and those for xylene jumped 7.8 percent. The weighted average “BTX” value increased $0.159/gallon ($0.04/liter) to $2.394 – an increase of 6.7 percent from the prior week.
The increase in “aromatic” octane enhancer prices increases the competitiveness of ethanol for use in gasoline blends.
Brazilian ethanol prices moved 2 percent higher last week, with FOB Santos prices gaining 0.983 cents/liter to their last quote of 55.983 cents/liter. The weakness in the U.S. market, combined with Brazil’s higher pricing, moved the FOB Houston-FOB Santos, Brazil spread to further favor U.S. product. The spread was last quoted at -13.914 cents/liter, after moving 14 percent lower this week.
Lower corn prices have greatly benefited ethanol production margins, which are estimated at their highest levels of 2017. Margins for a dry-mill plant in Iowa increased 8 cents per gallon (2.1 cents/liter) this week to just shy of 40 cents/gallon (10.6 cents/liter). Corn futures are continuing to retreat, which will keep margins, and production, near current levels this week.
Petroleum markets are generally higher this week with Brent crude oil futures up $0.06/gallon ($0.0159/liter) and Hurricane Harvey pushing WTI crude oil futures down $1.33/gallon ($0.3513/liter). RBOB gasoline futures are higher as mentioned above and FOB U.S. Gulf CBOB and RBOB cash prices up $0.11-0.20/gallon ($0.029-0.05/liter).
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