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US ethanol output falls at fastest pace on record

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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 hold-ups.

'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 margins'

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 gentle increase.

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 production."


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