Ethanol futures continued to erode lower on Wednesday despite further reductions in ethanol inventory levels. Nearby ethanol contracts fell 1 to 2 cents per gallon at the end of the session as new crop corn prices slipped 6 cents a bushel at closing bell.
This lack of market support is somewhat surprising, given that RBOB gasoline prices bounced higher, and ethanol stocks took an additional tumble. Total ethanol inventory levels fell 2.5% or 16.8 million gallons since last week. This came as overall demand is starting to pick up ahead of the Memorial Day holiday and ethanol production actually for the week ending May 10.
Ethanol stocks are currently at the lowest level since December 2010. So, not only has the "ethanol glut" of 2012 evaporated, the entire inventory buildup period of 2011 has been erased also. This is expected to continue to create underlying support in the ethanol market as ethanol producers will find it hard to significantly increase production based on corn availability.
Rick Kment can be reached at firstname.lastname@example.org
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