The recent strong support in RBOB gasoline markets while corn and ethanol prices have continued to erode lower has created a wider-than-normal price spread between the ethanol price and RBOB gasoline price levels. Ethanol is currently trading at an 85-cent discount to the gasoline market, which is the widest price spread seen since spring 2012. With traders in the gasoline market focused on tight spot market supplies and what could develop into a counter seasonal demand spike, ethanol prices are slipping lower due to lower production costs and expected slowing seasonal demand for ethanol. Corn futures prices have dropped over $1 per bushel in the last month, and this movement lower has not only reduced overall ethanol production costs at many plants, but also led to some plants resuming production levels as margins were improving. Traditionally, the wide discount to gasoline prices has been a boost for overall demand, but with ethanol supplies currently over 10% ahead of last year, even increased demand is not likely to spark price support in the ethanol market.
Rick Kment can be reached at email@example.com
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