As summer travels heat-up, US ethanol production slows.

Since late last year, the U.S. has produced record volumes of ethanol. This is largely because exports have increased and domestic demand has remained steady.

The summer driving season has led to a drop in output from the record-breaking levels of recent weeks.

The large stocks of corn-based fuel additives can temporarily offset the slowdown in production.

In the next few weeks and months, it will be important to monitor both domestic and export trends since this is typically when U.S. motor fuel demand peaks.

Recent Data

The average U.S. production of ethanol for the four weeks ending May 23 was approximately 1.026 millions barrels per day. This is the highest level for this period in the last six years, but still behind levels from six and seven year ago.

The ethanol production usually drops at this time of the year. However, from late last spring through early spring it had been at record levels. This caused supplies to reach 2020 records by March.

The U.S. stocks of ethanol have experienced a seasonal decline, but they remain at record highs for the year. Strong rates of production and consumption are somewhat offset by each other. Exports of ethanol have been a major factor in the recent increase in use.

The implied demand for motor gasoline in the United States hasn't been as impressive. In the last two months, the rates were similar to those of the previous year, but far below the volume before the pandemic. This was the time when the demand for U.S. motor gasoline peaked.

Fuel efficiency improvements and changes in driving habits, particularly after the pandemic, have led to a reduction in gasoline consumption. This is a threat to U.S. ethanol producers.

The push to promote cleaner fuels overseas has been a positive. Exports were only 11% of the U.S. production in 2023-24, but shipments reached record highs, thanks to Canadian, British, and Indian demand.

A FIGHT BETWEEN EXPORTS & TRAVEL

Exports of ethanol in the United States have remained strong this year. However, over the past month, they have fallen below their levels from a year ago, and last week, they reached an eight-week-low.

Exporters have some cushion as the September-March period saw a 26% increase in shipments, a new record.

This summer, the increase in gasoline demand in the United States could offset this recent drop in ethanol exports.

According to Deloitte’s annual travel survey, 53% of Americans plan to go on a leisure vacation this summer, compared to 48% one year ago. This is despite the fact that their financial sense of well-being has declined over the past year.

Americans are planning to drive more often this summer than in previous years. They also plan on taking multiple short trips.

Gas prices are generally supportive of this effort. The national average price for non-leaded fuel is about 11% less than it was a year earlier.

Consumer habits can change abruptly whenever economic uncertainty increases, and the year 2025 was particularly fraught with these risks.

Karen Braun is an analyst at. The views expressed are Karen Braun's.

(source: Reuters)