Ethanol futures continue to move higher with gains of 1 to 2 cents per gallon seen through the trading session. This accounts for a 6-cent-per-gallon bounce in front-month futures in the last three trading sessions. The recent pullback in ethanol production is one of the reasons for the additional support in ethanol prices. Although this is a short-term shift that can quickly be adjusted, lower production of ethanol going into summer months is likely to lead to tighter supplies over the next several weeks or months. Total ethanol production fell 3.1% last week, with a total production level of 38.2 million gallons per day. This is an average daily reduction of 1.2 million gallons produced. But even with the weaker production levels, ethanol inventories posted a strong gain of 3.1%. Ethanol stocks grew by 21 million gallons through the week. The shift in stock levels comes more from weekly shifts than a wide ranging dynamic change between inventory levels, production and demand. Inventory and production levels continue to trail year-ago levels, at this point supplies will continue to be tighter than usual through the rest of the year, but long-term price support is still uncertain given current corn prices and profit margins for producers. Production is not expected to see a significant price boost anytime soon due to the limited ability to move product in a short period of time as transportation delays are still fresh in mind.
Rick Kment can be reached at firstname.lastname@example.org
© Copyright 2014 DTN/The Progressive Farmer. All rights reserved.