Ethanol Blog

Corn futures posted strong gains Friday following tighter-than-expected stocks in the USDA report released during the morning. This is attributed to lighter production estimates, limiting the amount of corn available to the market. March corn futures posted a 21-cent-per-bushel rally during the session.

Although this is a far cry from a limit move in the complex, it is significant.

First of all, this rally comes one day after March contracts posted a contract low of $4.12 per bushel. This quickly pushed prices to a 2014 high and the highest level seen since Dec. 24.

But more significant is the fact that this proves that the market can move in a wide range. The last time that March corn futures posted a double-digit price shift was Sept. 30. This was before the governmental shutdown as prices fell 13 cents per bushel. In a corn market that over the past several years has been characterized by wide price swings, you have to go back to August 2013 to find a price shift greater than Friday's 21-cents gain.

On Aug. 26th, March corn futures posted a 31-cents-per-bushel gain. What this means for ethanol is that if increased price volatility is seen in corn markets, due to expected tighter supplies, there could be some follow through price shifts in nearby ethanol contracts. This was represented Friday by a boost of 3 to 4 cents in nearby contracts.

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

(ES)

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