Ethanol inventory levels at the end of last week fell to 630 million gallons, according to the latest report released Wednesday by the EIA. These levels tie stocks in October for the lowest inventory level on hand since records have been reported on a weekly basis in June 2010. The implications of falling stocks well past when seasonal demand support is seen and corn prices have moved close to $4 per bushel in many production areas could lead to additional price moves in ethanol markets. The lower ethanol stock levels is not doing much for corn markets at this point, although weekly ethanol production climbed higher 2.5% from week-ago levels. Traders are focusing on the ability to clear both ethanol and gasoline product from the inventory, with additional support possible and very likely in the near future due to holiday driving demands. It is unlikely that aggressive ethanol production will ramp up to fill the gap of lower inventory as current supply levels are 18.1% under year-ago levels. But even with the tighter supplies, traders are far from being very aggressive as ethanol prices are still carrying a 68 cent-per-gallon discount to RBOB gasoline prices.
Rick Kment can be reached at firstname.lastname@example.org
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