Overall direction of the market following the release of the ethanol data in the latest EIA report points to the fact that other commodity market moves had more of an impact in the narrow movements of ethanol futures than supply and demand factors, at least temporarily.
Ethanol futures were able to bounce fractionally higher at the end of the trading session, after keeping prices stuck in a narrow range through the entire day. The 5-cent rally in corn prices and triple-digit gain in crude oil prices had more to do with ethanol market moves that the weekly report.
Although supply and production levels continue to be closely watched, by traders as well as all industry professionals, the impact of the market are likely to be more long term in nature rather than direct daily impact to prices. Ethanol production last week increased 1% following the recent weakness and stability in the corn market. At the same time that ethanol product grew, inventory levels fell. The loss in overall supplies across the nation was moderate, slipping just 1.9%, which equates to 16.8 million gallons. This puts total inventory levels just 3.4% over year-ago levels. The fact that earlier in the year ethanol stocks hovered more than 25% above the previous year's numbers creates a much different picture than following price levels alone.
Even if inventory and production levels continue to shift moderately through the rest of the fall, ethanol futures prices may find a hard time breaking out of the iron clad range seen over the last six weeks. And most of this is based on the current stability seen in corn markets.
Rick Kment can be reached at email@example.com
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