OREANDA-NEWS. April 27, 2015. Just two months ago, we were at the National Ethanol Conference in Grapevine, Texas, talking about how the US ethanol industry was “going global.”

At the time, the economic climate painted the US as a major export player in 2015. Ethanol in the US was dirt cheap, demand in other markets was strong, and the arbitrage window of opportunity was gaping for producers to take advantage of strong buying interest abroad.

While those prospects haven’t totally dissolved, it looks like we’re headed in that direction.

A major indicator came Wednesday morning when US Energy Information Administration data showed the first weekly imports of ethanol in nearly four months. It was just the second time in the last six months that the EIA showed imports in its weekly report, and the 53,000 b/d of imported product was the largest amount in nearly two years.

godwin-us-weekly-ethanol-imports

While the US remains an export player to Asia and the Middle East, the fact that we are importing product from Brazil again speaks volumes about the possible normalizing of the global ethanol market in the coming months.

Can the US maintain its position as a dominant exporter while simultaneously capitalizing on cheap product through imports? Soon enough, a direction will be chosen to pave the way for 2015, and most market participants seem to be thinking this is just the tip of the iceberg.

For now, it’s still too close to call. The arbitrage window between the US and Brazil — far and away, the two biggest producers — is too narrow to provide a clear answer on where we’re headed. There would need to be a major shake-up in prices for something to give.

Most of my sources think we hit the rock-bottom floor in January when Chicago Argo ethanol fell below \\$1.30/gal for the first time in nearly nine years, according to Platts assessment data. Right now, we’re up around \\$1.60/gal, but we’d have to add another 30 cents or so to become an overwhelmingly attractive option as a regular customer of imports.

Most sources think we hit the rock-bottom floor for production rates last week at 924,000 b/d. Now that we’re approaching May, one guy even predicted that we’d finally see one million barrels per day sometime before the summer driving season hits. We came close in December at a record 992,000 b/d when margins were through the roof.

As far as supplies are concerned, we have now maintained more than 20 million barrels of stockpiles for 15 consecutive weeks, just eight weeks shy of the record set in 2012.

Coincidentally, that 2012 record began in January and lasted until July. This year, we first hit 20 million barrels in January, but can it last until July? If not, then expect the bulls on parade sometime soon.

If not, these imports that we’re seeing might just become unsustainable blips in an eerily balanced market.