Falling oil prices dampen demand for ethanol and corn in the US

The gradual decline in oil prices is reducing demand for ethanol and, as a result, corn in the US, putting upward pressure on prices. Traders do not believe in the recovery of demand for oil and other commodities in the 1st quarter of 2023 in China, where the decline in the real estate industry continues and the number of covid diseases has increased after the easing of quarantine restrictions.

March Brent oil futures on the London ICE exchange have fallen by 9.1% to $78.8/barrel since the beginning of January, and February WTI oil futures have fallen by 8.7% to $73.8/barrel. barrels, which increased the pressure on raw materials markets.

Under pressure from the oil market, March corn futures in Chicago have fallen 3.8% to $257/t since the beginning of the year and are likely to continue falling on data about the reduction in ethanol production.

According to the EIA association, during the week of December 24-30, ethanol production in the US decreased by 14% to 844,000 barrels/day, although during the year the average figure exceeded 1 million barrels/day. Ethanol stocks for the week decreased by 192 thousand barrels, but remain at a high level of 24.444 million barrels. Falling demand for corn from ethanol producers will add pressure on prices.

The market is additionally pressured by the slow pace of exports from the USA against the background of active deliveries from Brazil. According to the US MSG, in November corn exports increased by 17% to 2.427 million tons, which is still almost double the figure for November 2021.

Falling exchange prices reduces the demand for Ukrainian corn, which remains the cheapest on the market. Against the background of logistical problems, buyers do not risk buying goods with an uncertain delivery date. Ships have been waiting in queues for loading for more than a month, and the idle time eats up the profits of Ukrainian manufacturers. Demand prices for corn for delivery to Black Sea ports remain at $200-206/t or UAH 7,700-7,900/t.

Tags: corn, prices, USA, ethanol