The latest EIA report indicated a strong buildup of inventory levels for ethanol over the last week. The week ending Nov. 30 showed a 42-million-gallon bounce in ethanol stocks. This brought total stock levels to 810 million gallons at the end of November.
Not only is this a 2 1/2 month high for stock levels, but it continues to erode the expectation that we are digging ourselves out from the glut seen through the entire year. Even with the increasing production level seen over last week, there is currently 23 days of ethanol supply available for the market.
Even though ethanol prices on the futures market are directed mostly by the movement in corn prices, the inability to clear overall ethanol product from the system could lead to disastrous results in the future.
Even with corn prices well over $7 per bushel, ethanol production levels have grown to a five-month high of 35 million gallons per day. The narrow margins in the ethanol market are expected to continue to limit overall production levels on a longer-term scale, but the ability to increase and decrease production so quickly will likely continue to keep production levels and inventories choppy during coming months.
Rick Kment can be reached at firstname.lastname@example.org