Ethanol Blog
Rick Kment DTN Analyst

Friday 11/22/13

Ethanol Prices Surge on Holiday Demand

With futures markets heading into the week of Thanksgiving, and expected holiday travel plans likely to help draw additional need for gasoline and ethanol product, prices of ethanol have seen amazing market support in front-month futures.

December ethanol futures have led the way higher, posting double-digit gains each of the last two weeks. Currently weekly price gains of 25.8 cents per gallon helped to boost front-month contracts over $2 per gallon for the first time since August.

This week's move follows a 10.3-cent-per-gallon price shift the week previous. The combined support over 36 cents per gallon represents what has been a rebound in the market and has established potential long-term support at $1.67 per gallon.

Short term needs are the main driver of the most recent market support, and is causing anxiety as to what will happen once holiday demand is accounted for. But for now, traders are aggressively sourcing short-term support, widening the premium in front-month futures with little concern to how the market will land after Jan. 1.

Rick Kment can be reached at rick.kment@telventdtn.com

(ES)

Posted at 4:40PM CST 11/22/13 by Rick Kment
Comments (1)
Rick, Futures is a 2-4 million gallon TOTAL in a 35 million per day market. Spot daily price is hovering around $3. Front month Future is at $2. With the RFS Targets capped for ONE YEAR, and this is in discussion for the next 60 days, no one will step on the gas to build inventory. So whoever is selling contract at $2/gallon for an item selling at $3, and who is expecting to roll-up into the follow-on month contract for $1.80 believes that the world-of-plenty-of-ethanol fuel is coming back... just because there is a lot of corn. The $2 contract will be delivering gallons in a 2.50 - $3 market. The shopping season is short. A Lot of gas will be needed every week between Black-Friday and New Year The Traders should be worried about December,not just after Jan 1! ------------------------------------ The industry is wiser. These contract prices should reflect more of just-in-time production the industry has managed to learn about during the drought season. Only a positive curve above spot ( Jan - March 4.00 Futures) might first cause the IMPORT door to open up and then this would get an additional US plant to open-up. Today such an action would be a risk against where EPA is at today. Without a positive future curve, just-in-time production might be interrupted with delivery issues like weather, train, barges related issues - thus raising up prices now and then.
Posted by Eddy Lahens at 5:17PM CST 11/22/13
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