Chicago Board of Trade Market News
Outlook: As the June 1 deadline approached, there was some anticipation that the biofuel announcement by the U.S. Government’s Environmental Protection Agency (EPA) could be construed as bearish for corn prices if mandated ethanol consumption were less than prior projections. That expectation proved to be somewhat correct, but only because the expectation for total gasoline use is down from earlier estimates. The current lower prices of gasoline are expected to stimulate increased gasoline consumption, and EPA is projecting such an increase in U.S. domestic consumption of conventional ethanol from 13.25 billion gallons in 2014, to 13.4 billion gallons in 2015 and 14 billion gallons in 2016. Please note that these amounts are not caps but minimums.
U.S. ethanol also has developed an export market. Recent declines in the price of corn are encouraging more ethanol production, and global buyers do take note when the price of ethanol is favorable in relation to gasoline. Present market conditions may stipulate that margins become thin for ethanol facilities, as is already the case for corn growers, but the overall outlook for both parties looks positive well into the future.