Ethanol Blog

Over the past two trading sessions, front-month May corn futures have posted gains of nearly 20 cents per bushel. This is sparking additional commercial and noncommercial buyer interest to step back into the market.

The surge higher in corn prices is not going unnoticed by ethanol traders. Over the last two trading sessions, front month April ethanol futures have gained more than 10 cents per gallon. This not only accounts for the higher cost of production, but also is creating additional margin into the market.

The idea is that overall ethanol production may build during the next several weeks, but demand growth typically seen over the summer months may easily overshadow any production gains.

This could allow for increased commercial and investment buying activity to develop in the market. The thought process is that it is better to step in now, rather than later and risk sharply-higher price levels.

Cost of production is still a very critical point in ethanol production levels. But on the other hand, traders are not willing to be caught short through the upcoming summer months and then scramble to gain access to needed supplies at premium price levels.

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

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