The ethanol market moved higher Friday, following a moderate bounce in corn prices as traders quickly stepped back into the market at the end of the week. This led to a gain of 2.1 cents per gallon in front-month January futures, to close at $2.229 a gallon.
But on a weekly chart, which is more accurate at following the general trend of the market, January ethanol futures prices fell nearly 7 cents per gallon for the week. This is the third straight week that the ethanol market has slipped lower, falling nearly 20 cents per gallon since the Thanksgiving holiday.
Traders continue to focus on the recent weakness in the corn market, as it has been nearly impossible to draw commercial or investment buyer interest back into a market that appears to be focusing on demand reductions.
Ethanol inventory levels continue to grow, with supplies well above levels seen last year in which the market has been trying to dig out from the supply glut through most of 2012.
This is creating concerns through the market that there could be more ethanol available in the coming months than we know what to do with, and further hinder ethanol plant margins and overall demand for corn if ethanol production levels sharply drop.
Rick Kment can be reached at email@example.com