CoBank’s Knowledge Exchange released its second quarter report on July 8, reporting that the U.S. fuel ethanol sector outperformed expectations during the three-month period and is well positioned for the second half of 2021.

According to CoBank, several key demand drivers underpin its outlook for ethanol, including general economic growth, seasonal summer driving, and more people driving as they return to offices and classrooms. These factors helped increase fuel ethanol production in the second quarter, with production recently trending above 16 billion gallons, CoBank said. The report also states that average daily operating margins more than doubled during the second quarter, reaching 26 cents.

Regarding E15, CoBank’s report indicates that 48 states have now enacted legislation allowing for the sale of gasoline containing up to 15 percent ethanol. The report, however, does not discuss the expected impact of the D.C. Circuit Court of Appeal’s July 2 reversal of the U.S. EPA’s 2019 E15 rule.

The report does note that biofuel policy continues to be a major area of friction in Washington and between ethanol producers and fossil fuel refineries. CoBank said its unclear where biofuels, fossil fuels, and electric-powered vehicles will fit in under a final infrastructure package. The report also cites the U.S. Supreme Court’s recent ruling on small refinery exemptions (SREs) as a negative development for the ethanol industry.

In addition, CoBank said that electric vehicle adoption, a long-term threat to ethanol, is powering ahead.

Grain prices will also continue to impact ethanol producers, according to report. CoBank said corn prices hit a nine-year high during the second quarter. Moving forward, elevated price volatility is expected to continue.

Additional information, including a full copy of the report, is available on the CoBank website.