US ethanol output fell at its fastest rate on record as the
so-called "polar vortex" swept through the country, bringing record low temperatures
to some areas and clogging up logistics.
US biofuel plants produced 868,000 barrels a day of ethanol
last week - down 51,000 barrels a day on output the previous week, the biggest
decline on records going back to 2010.
The slump reflected - rather than squeezed margins, the
usual cause of production setbacks – the unusually cold weather which struck
the US last week, bringing sub-zero temperatures to all states, and logistical
'Rail network ground
to a halt'
"During the reported week, we had the polar vortex," said Jerrod
Kitt, strategist for Linn Group, the Chicago-based broker.
"The vast majority of ethanol is moved by rail – there is no
pipeline. The rail network ground to a halt."
With ethanol outflow stalled, and inventories building, ethanol
plants were forced to cut back production to well below capacity levels.
'Very, very strong
Production levels may be affected for the next couple of
weeks as plants deplete their inventories, against a background of strong
competition for railcars.
"This will take a little time to work though," Mr Kitt told
The snarl-up has denied plants the chance to exploit some "very,
very strong" ethanol production margins - underpinned by low corn prices, which
remain in sight of three-year lows, at a time when ethanol prices have shown a
Mr Kitt estimated production margins at a, positive,
$1.50-2.00 per bushel of corn.
"That is a lot of money. They have every incentive to run up