The announcement in the latest EIA data that was released Wednesday, that ethanol production is rising, is particularly a shock to the market or causing additional waves in market prices.
But it comes as several announcements have been seen over the last couple of weeks that idled and slowed ethanol production facilities either have increased or started production, or are in the process to planning on gaining production levels sometime in the future.
This comes as overall demand for gasoline and ethanol has increased through the month of February with traders looking for more increases through the spring and summer.
The demand increases have brought overall inventory levels down. With weekly inventory levels at the end of last week falling 3% from the previous week, overall inventory levels are well below year-ago levels.
This is a significant change from the aggressive buildup in inventory levels seen over the last year, and indicating that supplies may continue to tighten if demand grows as expected.
The combination of tighter supplies, even at $7 per bushel corn, will likely support plant margins and should continue to increase production over the short term. But the supply and demand relationship is still in a delicate balance, and could easily be thrown out of whack by production companies adding too much production too fast through the upcoming weeks and months.
Rick Kment can be reached at email@example.com