Love’s Been a Little Bit Hard on Me – US Ethanol Margins Sink to YTD Low Amid Strong Production, Corn Price Rebound

Companies Mentioned: POET, The Andersons, ADM, Valero, Cargill, Yara, Fertiglobe, Woodside, ExxonMobil, BASF, KBR, Clean Hydrogen Works, LSB Industries, CF Industries, Koch Fertilizer, Corteva, Nutrien, Farmer Business Network, Summit Carbon Solutions, Gevo, Phillips 66, United, Aramco, TotalEnergies, SIRC, Easyjet, Renavia, Enilive, Deere, LG Chem, Mastercard, Obopay, Mars, Royal Canin, Costco, Walmart
Commodities Mentioned: Ethanol, Ammonia, Nitrogen, Natural Gas, Potash, Corn, Soybean, Carbon, SAF, Propylene, Fertilizer

Key Findings

General Thoughts: US ethanol production has been strong in 2024, and a new weekly production record was set in November – this has helped support corn prices in 4Q24, but ethanol margins are now near breakeven levels.
Supply Chain/Inputs: Global ammonia prices have surged to a YTD high in 4Q24, but we think recent price gains could reverse in 1H25, keeping us in favor of those with low-cost production positions relative to high-cost ones.
Biofuels: We discuss Summit Carbon Solutions’ efforts to build a carbon capture pipeline in the Midwest, some of the pushbacks it is receiving, and the pipeline being critical for some Midwest US ethanol units to cut emissions.
Sustainability/Transition: We discuss nitrogen-based fertilizer emissions beyond production and transport, the role of precision agriculture and alternative products, and why our view of nitrogen fertilizer use is still constructive.
Downstream/Other: We discuss the rise in food price inflation YoY, as the UN FAO World Food Price Index hit a YTD high in November, and highlight recent strength in the US Dollar and US corn and soybean price movements.