Ethanol buyer support on Tuesday was limited at best following the aggressive market pressure seen in commodity markets on Monday. The fact that ethanol futures did not regain all of the Monday losses in one day is not surprising in itself. But when compared to other commodity moves, additional questions of market direction start to arise. Front-month May ethanol futures rallied 3.3 cents per gallon higher on Tuesday, closing at $2.404 a gallon. This comes after a 5.1-cent-per-gallon tumble on Monday. The support in both the corn futures and RBOB gasoline futures markets makes the higher ethanol market price very understandable given the return of traders to most markets. But corn futures outgained their earlier losses by 5 cents per bushel on Tuesday, breaking once again the connection between ethanol and corn markets. Corn futures fell 11 cents per bushel on Monday, and the support of strong commercial buying flooding into the market pushed corn prices 16 1/2 cents per bushel higher Tuesday before closing bell. Traders are expected to closely follow the movements in the ethanol market through the next couple of trading sessions. If the intensity of corn price moves cannot be reflected in the movement in ethanol margins, there could be additional margin erosion through the production sector, as well as a stronger tie to the movement in gasoline markets heading into early May. It takes more than just one trading session to break the moves between corn and ethanol futures. But traders seem to be starting to focus more on upcoming demand rather than production costs.
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