Newsroom & Financials

Increase in Ethanol Production Likely to Outpace Near Term Demand

Posted 8/17/2017

According to a new report from CoBank’s Knowledge Exchange Division, the ethanol market will soon face worsening slim-to-negative profit margins, which could potentially push the industry toward consolidation. However, producers that are well-capitalized with strong balance sheets and cash reserves will be in the best position to weather the softening market. 

The report, “Ethanol’s Growth Path: Output and Export Uncertainties Both Rising,” outlines how an ethanol market fueled by corn prices at multi-year lows coupled with reinvestment into production capacity will push supply past demand growth.

“Forecasts indicate that total ethanol production by 2020 will have increased by approximately 850 – 900 million gallons, compared to 2017 levels,” said Tanner Ehmke, CoBank senior economist. “Without a substantial increase in domestic demand or exports to clear excess supplies, ethanol producers are facing a downturn over the medium term. Those who have access to multiple transportation markets and have invested in new technology will be leaner and more cost efficient enabling greater flexibility to endure prolonged periods of low prices.” Read more...

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