Ethanol production is eroding due to corn prices above $8 per bushel at the end of August through the Labor Day holiday. This is creating overall plant reductions as processors continue to run at lower production levels in order to focus on managing cost margins.
This pushed ethanol production 546,000 gallons per day lower. With ethanol output 1.6% below last week's levels and 7.1% below year ago levels, the focus is once again being placed on the inventory levels through the last four months of the year.
During the first full week of September, ethanol inventory levels increased 9.3 million gallons to a total stocks level of 796 million gallons. This is 10.5% over year-ago levels, and could be an increased concern to the market given the large inventory levels seen through the first half of the year.
Traders may continue to focus on the movement in the corn prices, but if further corn price reductions are seen, ethanol traders may continue to bail out of the market and also take production given the increased inventory levels available for use through the winter months.
Rick Kment can be reached at email@example.com