Although price moves in nearby ethanol markets were far from convincing as October contracts gained just 0.2 cents per gallon, and 0.5-cent-per-gallon gains were seen in the November contract, the second day of higher corn prices seemed to coax ethanol traders back into the market. With the corn futures price still looking at a down trend, as well as building inventory levels and expected sluggish near-term demand, it is very understandable that it would take a major shift to draw buyers back into the ethanol market. Even though a major shift would be a stretch for the corn market moves over the last couple of days, the support seen in the grain markets seemed to take traders focus off of the long term and back to the shorter, and more daily relevant look of the market. Concern remains that overall demand may continue to erode due to the high corn prices, but each price shift in the market, especially lower prices, causes end users to go back to the drawing board and focus on the potential risks and rewards to exit or remain in business. This means that, overall, long-term demand outlook is ever changing and the more volatile prices are, the more intense demand shifts are likely to be. So for now, ethanol traders are playing it safe, but still closely following the corn market price shifts with fractional moves in ethanol markets.
Rick Kment can be reached at email@example.com
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