Ethanol Blog

The focus in the ethanol market Monday has temporarily moved away from supply and demand issues associated with the upcoming holiday weekend and how short-term driving activity will affect the market.

The moderate to strong pressure in the corn market price seemed to create some additional pressure across all ethanol contracts. Ethanol futures fell 0.9 to 1.6 cents per gallon with the focus on more abundant supplies of corn and likely higher production of ethanol through the next several weeks.

With margins still strong at ethanol plants, and corn futures prices holding below $5 per bushel, it is expected that additional production will ramp up through the end of the month, but could also continue to trend higher during the majority of the summer. This could easily push the ethanol market from the tight supply situation seen earlier this spring to a position where inventory levels are burdensome once again and significantly weigh on ethanol markets.

It is likely production growth potential will outweigh the demand for ethanol. If production and supplies grow, prices are expected to remain extremely volatile over the next couple of months.

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

(ES)

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