Weekly Outlook: Prospects for Corn Consumption from Ethanol Production in 2017

The U.S. ethanol industry ended 2016 on a high note. Ethanol production for the week ending December 30 set a new ethanol production record with an average of 1.043 million barrels per day. The March futures price for corn moved higher last week to close at $3.58 in large part due to strength in the ethanol sector. Ethanol production and exports returned strong numbers over the first quarter of the marketing year. Currently, the WASDE forecast for corn consumption for ethanol production is 5.3 billion bushels. When taking into account an increase in projected gasoline consumption in 2017 and robust ethanol export levels, the ability to surpass this projection is a strong possibility. Domestic ethanol consumption in 2017 will be influenced by domestic gasoline consumption, due to the ethanol blending requirement, and the biofuels volume requirement associated with the Renewable Fuels Standard. The EPA final rulemaking for the Renewable Fuels Standard for 2017 was released on November 23 and is discussed in greater detail in this November 30, 2016 farmdoc daily article. In brief, the renewable fuels volume requirement is set at 19.28 billion gallons for 2017 which is up from the 18.11 billion gallons required in 2016. The conventional ethanol requirement is set at 15 billion gallons for 2017, 500 million gallons larger than 2016 and equal to the statutory requirement level. If the gasoline consumption forecast used by the EPA is correct, the E-10 blend wall will be 14.36 billion gallons in 2017. The EPA believes an ethanol supply of 14.56 billion gallons is reasonably attainable in 2017. Within the 14.56 billion gallons, E15 and E85 blends are expected to be 107 and 204 million gallons respectively. The ability to attain the E15 and E85 blend levels remains to be seen but the increase in ethanol requirements provides support for greater corn usage in 2017.