According to a 2012 Brief released by the U.S. Energy Information Administration (EIA), U.S. ethanol prices and production are lower compared to 2011. Spot prices for U.S. fuel ethanol were lower throughout most of 2012 compared to 2011. Prices were relatively stable during the first half of 2012, but they rose at mid-year as severe drought and high temperatures reduced corn yields, resulting in higher prices for corn that is used to produce the majority of all U.S. ethanol.

Higher ethanol prices during the second half of 2012 were mainly the result of higher corn prices, which rose 35 percent from mid-June through August due to concerns that the corn crop would be affected by the worst drought in the Midwest since the 1950s, coupled with triple-digit temperatures. During the hot and dry summer of 2012, the U.S. Department of Agriculture reported that 88 percent of the U.S. corn crop was within a drought area.

The 2012-13 U.S. corn crop is expected to be the smallest in six years at nearly 10.8 billion bushels, according to USDA’s January 2013 crop forecast, 13 percent smaller than the 2011-12 crop. USDA indicates that about 4.5 billion bushels, or 42 percent of the harvest, will go to make ethanol. That level is down from just over 5 billion bushels used to make ethanol during the previous crop year.

The brief finds that the combination of lower corn supplies, higher corn prices for ethanol producers, and weaker gasoline demand contributed to U.S. ethanol output falling from an average 900,000 barrels per day (bbl/day) during the first half of 2012 to an average of 815,000 bbl/day during in latter half, about 90,000 bbl/day less than in the second half of 2011.