What seemed like an unending pattern of increasing ethanol inventory levels week over week finally came to an end the week before Christmas, according to the latest Energy Information Administration report released Friday morning.
Ethanol stocks fell 2.5% or 21.9 million gallons as of December 21. This brings total inventory levels at 853 million gallons, which continues to remain nearly 15% over year-ago levels.
This pull down in stocks seems to be too little, too late to make a significant change in the overall market. After the holidays, general driving activity and ethanol demand typically slows significantly until later in the spring. So with production of ethanol unable to make sizable week-over-week decreases, it is likely that the ethanol market will remain in a surplus supplies situation for the foreseeable future.
Actually, even though inventory decreased, ethanol production moved higher 1.6%. Even with ethanol production 13.3% lower than the 2011 levels, the lack of demand seen in the ethanol market is likely to keep margins narrow, if not negative, through early 2013. Traders in the ethanol market continue to follow the corn market, but many buyers are only willing to buy hand-to-mouth supplies because of the large surplus product available to the market.
Rick Kment can be reached at firstname.lastname@example.org
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