Ethanol Blog

Lower Production Unable to Slow Inventory Growth

Rick Kment
By  Rick Kment , DTN Analyst

Although ethanol production slowed moderately at the end of last week due to the current ethanol prices and weakening margins, the light to moderate reprieve in production was not enough to slow overall inventory growth through the country.

Total ethanol inventory grew 1.2%, or 10.2 million gallons, at the end of last week from the week previous. The biggest concern to the market going forward is that current inventory levels are nearly 22% over year-ago levels with very little incentive for producers to see any significant shift lower in production over the near future.

If this trend continues, there is likely to be some additional aggressive price pressure which could bring concerns of an even greater ethanol glut than what was seen two years ago. But for now, the current trend of production and inventory building is not changing quickly, if at all. Demand for ethanol increased through this time period, but the overall strength in production levels is likely to limit a reversal of supplies any time soon.

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

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