Ethanol Production Rebounds Amid Rising Corn Prices

Ethanol production saw an increase of 43,000 barrels per day, supporting the upward trend in corn prices. As prices rise and exports are projected, investors should evaluate the implications on related stocks and commodities.

Date: 22-05-2025

AI Rating: 7

Market Overview: The corn market is experiencing positive price movements, with prices rising by 6 to 8 cents, indicating bullish market sentiment. An increase in ethanol production by 43,000 barrels per day to 1.036 million bpd demonstrates an uptick in demand for corn as a biofuel feedstock, which could support corn prices further.

Ethanol stocks declined, which suggests tightening supply in the short term. This situation reflects positively on corn producers as higher ethanol production generally correlates with higher demand for corn. The draw of 501,000 barrels from ethanol reserves combined with reduced refiner inputs can impact profit margins positively for firms involved in ethanol production.

Export Sales and Argentine Tax Impact: Anticipation of the upcoming Export Sales report indicates strong potential old crop business, estimated between 0.7 to 1.6 MMT, which may further boost corn prices if the figures meet or exceed expectations. Conversely, the expiration of Argentina's corn export tax reduction will revert to a higher tax rate of 12%. This could affect export competitiveness and prices in the short-term, potentially leading to lower demand from international markets.

With Brazil's second corn crop estimated significantly higher than previous reports, this could ease any supply shortages but may also lead to price stabilization or reductions if demand does not keep pace. This new supply outlook may result in downward pressure on corn prices if the global market is flooded with excess supply.

Investor Considerations: Investors should closely monitor the effects of the export tax changes and global production forecasts on corn prices, as these factors are crucial in determining the profit margins for companies involved in agricultural commodities. A potential rise in ethanol production should also be watched, as it directly affects demand for corn. The market dynamics and how they play out in the immediate term will be critical for evaluating any investment strategies focused on agricultural commodities.

Stocks: ADM BG SYT CORN