Ethanol futures tumbled once again following moderate to sharp losses in the corn market Thursday. Nearby ethanol futures closed 3 to 3.5 cents per gallon lower on the weakness in corn futures and demand uncertainty. Corn futures closed 10 cents lower in the front-month December contract, while other nearby contracts posted slightly less aggressive pressure. This move lower is a counter to the bounce higher seen Wednesday, but a clear indication that the sharp losses seen over the past few days cannot be erased or ignored by one up day in the market. We could see additional commercial and noncommercial liquidation in the ethanol market as traders are concerned not only about the direction of the corn market, but the demand for ethanol through the end of the year. If corn prices continue to erode, it is likely that additional production will quickly be seen. This will likely add additional pressure in ethanol prices and weaken overall production margins based on seasonal demand for ethanol.
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