Ethanol Blog
Rick Kment DTN Analyst

Monday 06/09/14

Ethanol is Caught in the Middle

Nearby ethanol futures were unable to move in any significant direction Monday with narrow fractional gains in front-month July futures being offset by fractional losses in other nearby summer and fall contract months.

The news stories focusing on China's announcements that they will not import dried distillers grain from the U.S. confirmed what had been expected and rumored for quite a while. However, this significantly added to the pressure in corn markets. This will likely create long-lasting impacts to the overall ethanol industry.

With such a significant amount of distillers grain exported to China, this will create dramatic price pressure on domestic products, and reduce revenue at ethanol plants. But the pressure in corn markets will also have short-term implications in reducing overall production costs. The challenge the industry will have now is to find other domestic outlets for the product that still can be financially viable and maintain co-product values. Separate from the corn and distillers grain market activity was the aggressive gains in the energy segments.

Crude oil futures broke out of the range-bound levels seen the last month, rallying $1.75 per barrel Monday. This sparked strong buyer support through the RBOB gasoline market also, and created some traders to expect the ethanol market to trend higher over the next two weeks. The balance between these two issues will likely keep ethanol prices choppy over the coming days, and potentially weeks.

Rick Kment can be reached at rick.kment@dtn.com

(CZ)

Posted at 3:10PM CDT 06/09/14 by Rick Kment
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