Ethanol futures have moved 13 cents per gallon lower in the last two trading sessions as several factors are creating additional pressure on nearby price levels. Wednesday's announcement by the EIA in its weekly report that both ethanol and gasoline inventories showed increases at the end of last week has created some short- and long-term concerns to the market. Given the volatility in ethanol prices over the last two months, based primarily on inventory levels and transportation delays, growing inventory levels in the ethanol market may bring relief, but also point to more stable and lower price levels. But growing RBOB gasoline inventory levels after a spring of falling supply levels is causing some to wonder if the main surge of buying has already passed. This would put the peak before the Memorial Day holiday weekend, and could create some pressure through all energy markets. A weaker gasoline market typically does not bode well for increased ethanol prices, especially if corn prices start falling. Corn markets have crept higher since January based on weather uncertainty and planting concerns. But the expectation for warmer and drier weather over the next week is putting pressure on this market, and accounted for active double-digit losses Thursday. Short-term moves in the corn market are the main focus of the active ethanol market losses. But traders are balancing these moves with the uncertainty about demand support through the next two months for both gasoline and ethanol. This pressure could lead to additional market losses in nearby ethanol contracts over the next few days, with many caught between short- and long-term market direction indicators.
Rick Kment can be reached at firstname.lastname@example.org
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