The reduction in the production of ethanol in USA and Brazil collapse of corn prices
Introduced to combat Covid -19 most of the developed countries of the world quarantines dramatically reduced the demand for automobile fuel, resulting in reduced ethanol proportion of the fuel in the US is 10% and in Brazil – about 30%.
For the production of ethanol the US uses mostly corn, with a volume of almost 140 million tonnes a year and Brazil – sugar cane. But lately many companies have reconfigured for processing corn, making the consumption of corn for ethanol in Brazil will increase from 4.5 to 9.1 million tonnes per year.
corn Prices on Tuesday came under powerful pressure from the USDA report on a record acreage of grain in the United States in 2020, but to keep from falling. The second impact on prices caused the weekly report of the Association of EIA, according to which the average production of ethanol in the U.S. for the week decreased by 20% to the lowest since April 12, 2013-level – 840 thousand barrels/day. As a result, some refineries closed, while use of corn for ethanol per week was reduced to 600 thousand tons to 2.24 million tons Stocks of ethanol rose 6% to a record 25.7 million barrels, which led to the fall of the prices and margins processors became negative.
Experts believe that the consumption of motor fuel in the U.S. could be reduced by 50% in the case of an extension of the quarantine and the transfer of employees to remote work, part of which will remain in this mode after completion of the quarantine.
the May corn futures in Chicago after the publication of the report fell to 131,4 $/MT, but later rebounded to 132,2 $/t Total fall for the day was 1.2% for the month almost 15%.
a Negative margin of corn processing for ethanol in Brazil has led to force majeure waivers previously executed contracts for the purchase of corn. Separate processors even sell stocks of raw materials, hoping later to buy more cheap corn second crop. Domestic corn prices recently rose to 190 $/t due to the reduction in inventories due to strong exports in the past season and increased demand from ethanol producers, who had planned this season to double the amount of processing.
But now the volume of corn from the United States and Brazil that will not be used in the production of ethanol, will fall on the world market and collapsed the price.
pandemic Covid -19 drop in gasoline demand shows what the market of ethanol in 5-6 years, when transport will be mostly electric and use of gasoline will decrease and the volumes of corn and sugar cane will greatly exceed the demand from the food industry.
