Trade in ethanol markets remained sluggish in a narrowly mixed range despite the sharp rally through the rest of the energy complex. June ethanol futures led the complex lower, losing 0.7 cent per gallon.
Even though deferred futures posted fractional gains, the overall lack of movement in the ethanol complex is somewhat surprising. Narrow losses in corn prices seemed to bring traders' focus back to production costs and corn markets, but inventory fell nearly 4.8% from week-ago levels.
This created a tighter market situation during spring when increased overall demand is expected over the next couple of months. Although ethanol production increased for the second week in a row, the focus on growing demand through the upcoming summer is expected to lead to aggressive production and buying.
The greatest shift seen Wednesday was the extremely large gains developing in energy markets. RBOB gasoline futures rallied 5 to 6 cents per gallon in nearby contracts, while crude oil futures settled more than $2 per barrel higher. As summer driving season nears, falling ethanol supplies is expected to continue. This will likely add even more buyer support through all markets. Increased volatility and wider market price swings are likely to be seen in the near future.
Rick Kment can be reached at email@example.com
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