EIA Petroleum Supply Monthly Data: For the latest month of actual data in April, ethanol production was 1.246 billion gallons with a monthly residual error of 34 mil gals. Refiner input was 1.176 bil gals and the calculated inclusion rate for the 11.687 bil gals of MoGas receiving ethanol was 10.06%. About 97% of all MoGas (with 12.044 bil gals) did indeed receive ethanol. Ethanol ending stock were 845 mil gals with no imports and exports at 65 mil gals.
EIA Short Term Energy Outlook Data: Using the August forecasts, the STEO is forecasting 2015 ethanol production higher at 14.506 bil gals & 2016 at 14.483 bil gals compared to last month. EIA is forecasting MoGas production higher at 139.973 bil gals in 2015 & 140.479 bil gals in 2016, while also increasing ethanol blending in 2015 to 13.840 bil gals & 2016 to 13.893 bil gals. EIA is implying ethanol net exports must decline in 2015 to 665 mil gals & 2016 to 591 mil gals by assuming Brazilian ethanol imports will increase both years (pg 4). EIA's WTI crude oil price forecast continues to come down and is near $50/bbl in 2015 & $54/bbl in 2016 (pg 5). Their Wholesale MoGas forecast is still projected to decline and at a rate faster than the ethanol futures market. If this happens, it will narrow ethanol's discount to MoGas as 2015 proceeds, not counting the portion of D6 RINs that isn't already priced into spot ethanol (pg 6).
DOC US Census Foreign Trade Data: Ethanol exports in June were down for the 4th month in a row coming in at 60.23 mil gals, with Canada receiving the most at 22.9 mil gals and Brazil receiving nothing (pg 7). For the first half of 2015, 437 mil gals of US ethanol have been exported. If this pace continues, 875 mil gals of ethanol will be exported this year (pg 8). Ethanol imports in June totaled only 0.7 mil gals all coming from Brazil, bringing the first half of 2015 imports to 17.1 mil gals (pg 9). However, Brazilian imports are likely to increase for the next few months of 2015 as the D5/D6 RIN price spread was around 40 cents following EPA's June NPRM and is now around 24 cents. Also, a stronger US dollar over the Brailizan Real is helping to move some ships north.
EIA vs DOC vs EPA Ethanol Exports: EPA publically acknowledged that they made an error in their calculation of ethanol exports and they will fix this problem in the final rule.
"Ethanol that is exported in undenatured form would not have generated RINs, and thus should not have been subtracted from the total number of RINs generated for fuel ethanol in 2014 for purposes of calculating the available supply of RINs for 2014 in the proposal. EPA intends to account for this and other information on the available supply of 2014 RINs in the determination of the appropriate volume requirements in the final rulemaking."
Thus, you can see from page 8 that an extra 370 mil gals of undentured fuel ethanol will be added back to the 2014 RIN supply. This will increase 2014 conventional biofuel demand to 13.62 billon ethanol-equivalent gallons and should lead to the 2015 & 2016 conventional biofuel demand increasing to 13.77 & 14.37 bil ethanol-equivalent gals respectively (pg 12 & 13). However, these numbers could also change slightly with new updated data that has come into EPA's EMTS system. Using my own calculations and only EPA EMTS updated data (so no EIA export data as EPA did in the June 2015 NPRM), I'm calculating the 2014 D6 RIN Supply at 13.83 billion RINs. This 210 million ethanol-equivalent gallon plus difference is mainly from the fact that EPA's EMTS 2014 D6 exports are only 237 million RINs compared to DOC's 466 million denatured ethanol exports (pg 8). In the Final Rule, I'm expecting EPA to continue using DOC ethanol export data, but only denatured in their calculations and increase the 2014 Renewable fuel RVO to 16.3 billion ethanol-equivalent gallons. If for some reason they use EMTS export data, which is very unlikely, this RVO could increase to 16.5 billion ethanol-equivalent gallons. The 2015 & 2016 Final Renewable fuel RVO's are likely to be near 16.67 & 17.77 billion ethanol-equivalent gallons, respectively. Also, there is good chance for these RVO's to be increased further because the EIA's Aug-2015 STEO has raised its MoGas consumpution forecasts 1.3 & 2.25 bil gals for 2015 & 2016, respectively, since its May report used in EPA's NPRM. These forecasted increases in MoGas consumption, lead to forecasted increases in ethanol blending of 451 & 367 mil gals in 2015 & 2016, respectively. The law requires the Oct-2015 STEO to be used in calculating EPA's Final Rule scheduled to be issued before November 30th, 2015.
PRX Blue Sky Model: After surveying clients and discussions with JSA & PRX staff we have decided to return to using our original conversion factor of 2.787 gallons per bushels for crop year 14-15, increasing this .01 gal/bu every year, making crop year 15-16 come to 2.797 gal/bu (pg 12 & 13). We may be overestimating corn consumption for ethanol production in 14-15 a little since we're 22 mil bushels more than USDA, but in 15-16 we're much less than USDA by 94 mil bushels. The reason for this is that USDA does not use a conversion factor to make their estimates. I have backed out USDA's corn to ethanol conversion factor for 14-15 at 2.798 gal/bu and decreasing to 2.752 gal/bu in 15-16 by using EIA ethanol production data/forecasts and the assumption that sorghum is converted to ethanol at 2.8 gal/bu. The only logical reason for this decrease in corn to ethanol conversion ratio is that USDA believes more ethanol will be produced in the 15-16 crop year than EIA is forecasting. Whatever the reason, we at PRX want to have a consistent approach that clients can see through because we're doing long-term forecasting in the Blue Sky Model.
USDA Grain Crushings and Co-products Production Data: We've just added this chart to our monthly ethanol report using data USDA started publishing in Feb-2015 (pg 14). Total corn use for crop year 14-15 YTD ethanol production has been 3.898 billion bushels, but there's missing data for Sept-14. If we trend this rate of use out 2 more months and add an extra month for the missing data, PRX estimates corn to ethanol use at 5.198 billion bushels. USDA is estimating 5.2 billion bushels, while PRX's Blue Sky model is higher at 5.221 billion bushels.
