“On the road again, just can’t wait to get on the road again,” are lyrics to an old tune by Willie Nelson, but they’re playing in the minds of many Americans, at least figuratively, across the country right now.
“People have a pent-up desire to go somewhere, especially on weekends – you can’t hardly find a parking spot at a Lowe’s or Home Depot,” Jordan Fife told AgriTalk Host Chip Flory on Thursday.
Fife, trading manager for the BioUrja Group, says that bodes well in the months ahead for ethanol demand, which took a nosedive a year ago when the pandemic reached U.S. shores.
The April 9 World Agriculture Supply and Demand Estimates (WASDE) support Fife’s perspective. WASDE says that corn used to produce ethanol was raised 25 million bushels based on the most recent data from the Grain Crushings and Co-Products Production report and the pace of weekly ethanol production during March, as indicated by Energy Information Administration data.
Now, with ethanol demand trending upward, the current challenge is that it’s quickly outpacing supply and driving ethanol stocks lower.
“Stocks now are almost 12% lower than the five-year average,” Fife says.
That percentage is even lower on the West Coast, especially in California, which Fife describes as the largest driving center for the U.S.
“It’s like 34% lower than the five-year average there, which is crazy. It’s really something to pay attention to,” he says.
Along with the increased consumption the other key factor impacting stocks is that retailers underestimated how much ethanol would be needed, once the country started to open up again.
Fife says gasoline demand is much higher as well, noting that it is 73% above where it was this same time a year ago. However, it’s 5% below this same time in 2019.
Nimble retailers are cashing in now. QuickTrip, Casey’s, WaWa and other large retailers, now have an advantage over large oil companies with regard to RINs (renewable identification number).
“Those large retailers are able to blend large amounts of ethanol, and when they do that – if they offer an E85 or E15, or something like that – they don’t have an obligation like an oil company. Therefore, they can capture the RIN and sell it back to these large oil corporations that have a volumetric of obligation to blend,” Fife explains.
That revenue will allow large retailers to offer fuel blends to consumers at substantially lower prices than they could have otherwise.
“That incentivizes people to see whether their vehicles can handle the blends, so we should see more discretionary blending at cheaper prices due to the RIN, and you should see higher volumes of ethanol being moved,” Fife says.
CHS, for one, is making E15 fuels accessible to more of its Cenex-branded retail locations, starting this month, now that it’s registered with the U.S. Environmental Protection Agency (EPA) as an E15 manufacturer.
Specifically, CHS plans to offer E15 at Nustar terminals in Kansas, Nebraska, South Dakota and Iowa. CHS currently offers E15 through its McFarland, Wis., terminal.
“As the nation’s leading farmer-owned cooperative, expanding options for ethanol blended fuel is important for our Cenex brand retailers and our farmer-owners,” say Akhtar Hussain, director of refined fuels marketing, in a company press release. “CHS has always been committed to offering ethanol blended flexible fuels throughout its network of 1,450 Cenex-brand retail facilities. Expanding access of Cenex-brand E15 at these select terminals further demonstrates that commitment.”
There are three general categories of ethanol-gasoline blends in the U.S. currently: E10, E15 and E85. The ethanol content of most of the motor gasoline sold in the United States does not exceed 10% by volume, according to the The U.S. Energy Information Administration (EIA).
Only flex-fuel and light-duty vehicles with a model year of 2001 or newer are approved by the EPA to use E15. Flex-fuel vehicles can use any ethanol-gasoline blends up to E85.
While Midwest consumers use the most ethanol-gas blends, Fife says he believes more consumers will use them in the years ahead, thanks to the focus many companies are placing on being carbon neutral.
“It’s a big buzzword right now, but I believe it could be a path to getting more ethanol-based fuels into higher population centers on the West Coast and California,” he says. “I really think we’re on the cusp of a brave, new world for ethanol.”
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