Ethanol Blog

Anyone who expected the tone of the ethanol market to change after the first of December was disappointed as sharp front-month gains developed Monday. December contracts moved to highs not seen since October 2012, with traders focusing more on reduced supplies around the holidays than production costs or expected future demand. This price surge is expected to remain a short-term situation as deferred contracts are unable to gain support due to lower corn prices. Front-month futures closed at $2.20 per gallon after a 15-cent per gallon rally. The market seems to be somewhat perplexed at such an impact in prices now, after slowly watching this scenario develop over the last few months. But firm stock markets and financial markets are fueling the economy and this has limited any pullback in demand after the summer driving season. There still could be some shifts in demand over the next few months, but with the holiday seasons under way, expect consumers to take to the roads as the celebrate with friends and families. This will likely spark additional interest in spot ethanol markets and potential widen the price spread between nearby and deferred contract months.

(ES)

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