The month of April and first week of May posted aggressive price pressure in ethanol futures as overall inventory levels continued to build over the last couple of months. The growing stock levels even while ethanol production increased during the month led to widespread concerns that overall demand for spring and summer ethanol product may fail to meet previous expectations and started many traders to focus on the potential to push prices back to levels seen early in the year. But the latest news by the EIA of falling inventory levels at the end of last week led to what seems to be a wide shift in momentum. Prices have rallied 16 cents per gallon in June futures contracts as traders focused on higher demand for ethanol and gasoline ahead of the Memorial Day holiday. This also is leading to some expecting additional stock pressure to be seen through the summer months. Even though prices remain vulnerable to additional longer term pressure, the focus on drawing active commercial and investment support back into the market could build long-term support in nearby and deferred contracts.
Rick Kment can be reached at firstname.lastname@example.org
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