The continued tumble of ethanol supplies as relayed in the latest EIA report on Wednesday have led to additional and aggressive price support through not only ethanol futures markets, but also in rack and spot markets.
Total ethanol stocks fell to a 3 1/2 month low at the end of last week. This continues to create widespread concerns in areas where transportation areas had led to tighter supplies over the last two months, but also in areas where ethanol production is strong and what product there is seems to be available to end users.
Growing ethanol production doesn't seems to be helping significantly as overall production of ethanol gained 2.5% over the previous week and now stands 10.5% from year-ago levels. Demand continues to increase as additional driver activity is expected to develop over the upcoming months, but the seasonal shift should not be surprising to any in the industry.
There could be additional pressure on inventory levels through the next several weeks as overall production can still moderately increase. Most producers don't want to get too crazy about increasing overall output, as the market could quickly turn lower once inventory levels seem to be stabilizing.
This could allow many producers to maintain strong production through spring months, but still be willing to throttle back plant output once inventories start to build and price levels ease. Strong markets are seen at the plant level based on the aggressive ethanol prices seen over the last month.
Rick Kment can be reached at email@example.com
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