March ethanol futures posted a minimal price bounce Thursday, gaining 0.2 cent per gallon while the rest of the complex remained focus on moderate price pressure and closed fractionally lower.
The narrow gains seen in spot month contracts continues to be driven by the firm buyer support in energy contracts. But beyond spot month market activity, traders are focusing on the overall firm inventory buildup that continues to be seen.
This is the time that overall inventory levels traditionally move higher, before active summer driving demand starts, but the fact that current production levels are still running well-above year-ago levels has many expecting further price pressure in the near future. Total stocks increased 0.8% at the end of last week from the previous week. This is the highest stock level seen since late March 2016.
Even though supplies are still under year-ago levels, the ability to steadily build supplies during the first quarter is likely to put even more pressure on ethanol futures which are holding at $1.50 per gallon in spot month contracts.
Ethanol markets have fallen 10 cents per gallon in the last two weeks as traders are already factoring this growing supply into the market, but light-to-moderate price pressure may continue to develop over the next month.
Rick Kment can be reached at firstname.lastname@example.org
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