Front-month ethanol futures which posted gains of nearly 30 cents per gallon the first week in December have given back the lion's share of this support by the end of trade Friday. January ethanol futures fell 25 cents per gallon in the last three trading sessions. This accounted for a weekly market loss of 23.8 cents per gallon.
As aggressively as markets surged higher the first week of December based on potential futures demand and supply tightness, traders liquidated front-month contracts nearly as fast. Ethanol production continues to climb through early December as corn prices are hovering around the $4 per bushel level.
The higher production is starting to build inventory at a much more rapid pace than traders are comfortable with. Front-month futures are now trading at $1.755 per gallon, which is more in line with seasonal trend, and is in range of other nearby contracts. The market remains weak across the entire complex, the once again front-month January futures are attracting most of the attention based on the need to access short-term supplies.
Rick Kment can be reached at email@example.com
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