Ethanol futures have seen some volatility over the last several weeks, but prices seem to be stuck in an 8 cents per gallon trading range, with boundry lines being established between $1.43 and $1.51 per gallon. Given the current production level and expected seasonal downturn of overall demand, the ability to stay in this trading range could help to bring some overall stability to the complex.
But compared to other markets surrounding the ethanol complex, and their price shifts in the same period of time, the narrow range is glaringly obvious.
For example, corn futures traded in the 53 cents per bushel range in that time period, while RBOB gasoline prices fluctuated 25 cents per gallon. Traders in the ethanol market appear to be much more rooted in market fundamentals, which has kept ethanol futures from showing overly aggressive price shifts in either direction, no matter that corn markets see 19 to 20 per day price shifts, or if ethanol inventory levels are reported at 7 1/2 month lows. It is expected that the current price of corn will continue to limit upward movement of ethanol over the next several weeks.
Also, steady to strong production levels and seasonal pressure in gasoline and ethanol demand over the coming weeks has the potential to maintain the current range well into the fourth quarter.
Rick Kment can be reached at firstname.lastname@example.org
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