Biofuels Industry Overview and Outlook Analysis
Ethanol production has rebounded to pre-COVID levels, driven by increased gas consumption and strong exports projected through the first quarter of 2022. Margins in ethanol have significantly improved, with nearby curve margins at breakeven levels. Supply of lease cars is tight and costs are rising. The industry faces risks from upcoming mandates, cost-cutting measures in rail services, and the looming federal vaccine mandate. Additionally, renewable diesel margins remain suppressed, but a substantial increase in capacity is expected in the coming years.
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RETAC November 16, 2021 Mark Huston Louis Dreyfus Company LLC 1
Ethanol Production vs Exports (kbd) Ethanol Production vs Exports (kbd) 1200 140 120 1100 100 1000 Ethanol Production (MBPD) Ethanol Exports (MBPD) 80 900 60 800 40 700 20 600 0 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 7
SUMMARY OF BIOFUELS Bio + RD Feedstock Usage 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 - Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Total Feedstock SBO August Production was 225 MM Gallons combined Biodiesel and Renewable Diesel 8
SUMMARY OF BIOFUELS Ethanol production increased to pre covid levels as has gas consumption Ethanol exports thru July 870MGals, Strong exports projected now thru 1st quarter 2022 at a 1.5mm Gal pace/month Margins in ethanol have significantly improved from negative levels during pandemic. Margins are all in the nearby curve, 30-45 day, with forward curve above breakeven levels but significantly less that nearby margins Lease car supply very tight and getting very expensive. Federal mandate on DOT 111 s approaching in 2023. Bio and Renewable Diesel margins- Given the rally in cash BO prices ( futures and refined) renewable margins have remained suppressed Renewable Diesel will see an additional 1.0 bil gal of capacity come online (>100% increase) over the next couple years Rail service is one of the biggest risks facing renewals today. PSR cost cutting has devasted crew base and other rail resources Federal vaccine mandate looming over all companies, with 100 or more employees, could be catastrophic to all industries but especially so to rail carriers 9
