After seeing their team repeatedly suffer heartbreaking playoff losses, Washington Capitals fans were hoping that this year would be different. But, once again, the dismal trend continued as the Caps lost Game 7 in the first round of the National Hockey League playoffs.
Unlike the Capitals, U.S. ethanol producers have recently welcomed the reversal of a declining trend in production that began in December 2011. Reflecting both lower corn prices (Figure 1) and higher ethanol prices (Figure 2), domestic ethanol production averaged 857,000 barrels per day (bbl/d) for the week ending April 26, the highest level since June 2012. Weekly ethanol production has increased by more than 10 percent since late January, when it was at the lowest level since 2009.
Corn prices surged early last summer driven by concerns about how the drought would affect U.S. corn production. The 43-percent rise in corn prices between June and August 2012 contributed to a rapid rise in the cost of producing ethanol. Although ethanol prices also rose sharply during the summer, the rise was not large enough to prevent a decline in producer margins, and domestic production fell as ethanol plants were idled.
Attracted by the rise in ethanol prices during the summer, U.S. imports of ethanol increased (Figure 3). For several months the United States became a net ethanol importer after nearly three years as a net exporter. Imports peaked at 122,000 bbl/d in the week ending October 26, 2012, with most imports coming from Brazil. As domestic corn prices eased during the fall, improving the competitiveness of domestic producers, imports of ethanol declined to 40,000 bbl/d in December. Since that time, imports have continued to fall, averaging 10,500 bbl/d during the first four weeks of April. Ethanol exports have risen in recent months but remain well below the 133,000-bbl/d peak reached in December 2011.
The spot price of ethanol in New York has continued to move higher and was $2.89 per gallon as of May 8, an increase of more than 8 percent since August and the highest level since late 2011. This recent rise in ethanol prices is tied to an increase in demand for renewable identification numbers (RINs) that are used for compliance with the Renewable Fuel Standard (RFS) program. Since December 2012, the price of an ethanol RIN (also referred to as a D6 RIN) has increased to $0.80/gal during the first half of May, after ranging between $0.01/gal and $0.09/gal from September 2009 until prices began to rise in early 2013.