Ethanol Blog
Rick Kment DTN Analyst

Tuesday 08/19/14

Retracement in Ethanol Continues

Ethanol prices see further market erosion Tuesday with losses of 1 to 1.8 cents per gallon developing. The focus in the ethanol complex broke out of the typical mold of grain market or gasoline market direction with each of these markets moving higher.

This is starting to turn the focus away from overall ethanol production costs which are tied to corn prices, and at least for the moment away from inventory levels. Ethanol traders are starting to look more at longer-term demand following the upcoming Labor Day holiday weekend.

Front-month September contracts have fallen 6 cents per gallon lower over the last week, but still carry a significant premium to deferred contract months based on short-term demand expectations. But the recent pressure in the market makes more sense when measured against the 21-cent surge in ethanol prices through the first half of August.

These gains focused on aggressive inventory reductions and demand support in late July and early August. But traders remain extremely cautious now that the traditional driving season is wrapping up, and economic uncertainty still is plaguing overall consumer spending. This could lead to additional short- and long-term pressure in ethanol prices through early fall.

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

(ES)

Posted at 2:32PM CDT 08/19/14 by Rick Kment
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