EU corn ethanol crush margins hit 8-year low

The simple ethanol crush margin from corn for EU producers hit the lowest ever level on Aug. 3 since records started in July 2013 by S&P Global Platts, at minus Eur153/cu m, as unfavorable weather conditions in major exporting countries led to a rally in global corn prices.

Despite Brazil, the second largest corn exporter globally and one of the largest suppliers to the EU, being in mid-harvest, domestic Brazilian corn prices are rallying on expectations of further downward revisions in the country’s corn output for the 2020-21 season (February-January), according to several government and private agencies.

Extreme weather conditions in Brazil ranging from drought to frost during the season led to a delay in planting, reduced yields, and lowered crop quality. Brazilian agricultural consultancy AgRural in a report Aug. 2 lowered its 2021-22 corn production estimate to 82.2 million mt from an earlier forecast of 85.3 million mt. Last year Brazil produced 102.6 million mt.

Brazilian corn exports in July dropped 50% on the year, according to customs data, and with it alternating with Ukraine as the largest supplier of corn to the EU, Euronext’s front-month corn futures rallied over 30% since July 1 to trade as high as Eur315/mt on Aug. 3 as a result.

Weather conditions in the US has also added to the support in EU corn prices, with concerns rising on the corn crop which was classified as 62% good-to-excellent versus 64% a week earlier and 72% the previous year, data published by the US department of agriculture showed Aug. 2.

European natural gas prices hitting all-time highs at Eur42.70/MWh on Aug. 2 on a tight global market exacerbated the situation for EU ethanol producers, with one source saying, “at the moment the cash margins are super negative, the less efficient plants will have to cut production if the situation continues.”

Despite an improvement in EU mobility data and sources highlighting healthy ethanol demand in major driving countries, T2 ethanol prices dropped 5% since July 1, and was assessed at Eur618/cu m FOB Rotterdam as of Aug. 3.

“Nearing the Eur600/cu m level [T2 prices] and with current grains and natural gas prices it is really hurting producers, it is worst than it ever has been before,” a source said.

Hellenic Shipping News

Tags: corn, Brazil, EU, weather, corn prices, ethanol crush