Distillers Corn Oil Production – DCO output ramped higher as Ethanol production re-engaged during week ending 05/05/17

Per the EIA’s Weekly Petroleum Status Report, average weekly ethanol production snapped higher, pushing back above a million gallons per day after a four-week slowdown. During the week ending May 5^th, production averaged 1.006 million barrels per day, up 20,000 barrels from the week prior. Gasoline demand pushed 2.75% higher, rising 252,000 barrels per day to 9.41 million. Ethanol stocks narrowed, falling by 158,000 barrels to 23.055 million. Ethanol imports resurfaced on the West Coast for the first time in the past 37 weeks, averaging 28 thousand barrels per day. The increased ethanol production raised corn demand by up to 296,000 bushels per day. DDGS output rose in sync with ethanol production, rising 2% week over week.

Year to date, ethanol production has averaged 1,028,889 b/d, down 1,900 barrels per day from last week but remains above last year’s average of 971,000 b/d. At its current pace, the industry is on track to produce 15.77 billion gallons, well beyond the 2017 finalized ethanol RVO of 15 billion gallons. Whether the industry can blend enough to meet the mandate remains the question.  Average ethanol production for the latest week is 44,000 barrels a day more than it was a year ago (1,006 bpd vs. 962 bpd). Domestic gasoline demand decreased 2.75%/252k bbls per day. Ethanol inventories narrowed 0.68% to 23.055 million barrels. Ethanol production as a percent of gasoline demand narrowed to 10.69%. 2017 gasoline demand is, on average, 13.78 million gallons less per day than it was over the same period in 2016.

As a co-product of ethanol production, the daily amount of distillers’ corn oil produced is approximately 8.33 million pounds per day, up 165,594 pounds daily from a week ago. The table and chart below show the recent amounts of corn oil produced daily over the past several months. Distillers’ corn oil has seen its demand rise from an average of 9 million pounds used in production per month in 2010, to 109 million pounds per month in 2016.

Due to state mandated low carbon fuel programs like California’s Low Carbon Fuel Standard (LCFS) and Oregon’s (CFS), feedstocks with lower carbon intensity (CI) ratings have been receiving more attention due to the higher credit value they generate. The credit will be larger, the larger the difference between the current baseline CI value and the feedstock CI value.