Ethanol industry profits have shown a slight improvement this month, supported by better margins and recent market developments. Dan O’Brien, agricultural economist at Kansas State University, says the outlook in May has turned marginally more positive.
“In May, we’ve seen a little bit more of a turn towards a more positive outlook. Not much, but an estimate of about $0.03 a gallon profit, again using kind of an Iowa-centric-based model with the latest numbers for the first three weeks of the month. So, we’ve got a breakeven cost of about $1.61 and the ethanol price at $1.64. You’ve got the DDG prices at about $145 per ton. The corn oil price is about $0.53, so both the DDG and the corn oil numbers are up.”
Profitability has been underpinned by slightly lower corn prices, which O’Brien identifies as the most critical factor in ethanol margins.
“A price of about $4.49 here in May and April. It had been about $4.63. So again, you dropped by about 14–15 cents the cost of corn and have some moderate improvement in ethanol, DDG, and corn oil prices, and you end up with some profitability.”
However, recent developments suggest that the industry is entering the summer driving season under different conditions than expected. Since late 2024, U.S. ethanol production reached record highs, driven by steady domestic use and a surge in exports. But production has pulled back in the last two weeks, according to Reuters, just as summer fuel demand is set to rise. For the four-week period ending May 23, ethanol output averaged about 1.026 million barrels per day—the best performance for that stretch in six years. Still, the figure trails output recorded six and seven years ago.
At the same time, gasoline demand in the U.S. has remained largely flat, hovering near the same levels seen a year ago. These trends have increased attention on ethanol inventories and their role in maintaining supply through the peak fuel season.
“We’re watching the ethanol inventories and trying to see how feed grain-based ethanol production and stocks are coordinating with what we think will probably be a decent time of fuel demand coming up this summer,” O’Brien says. “And kind of an up and down situation, it’s kind of surprising really that the U.S. ethanol production figures had dropped here of late, but yet for some reason last week or so, well, for some supply-demand factors, we haven’t seen a major drop-off yet in the inventory.”
With large stockpiles in place to buffer near-term supply shortfalls, the industry will be watching closely in the coming weeks to see whether export momentum continues and domestic travel demand is strong enough to draw down inventories and keep margins in the black.
