Ethanol inventory levels fell 4.2 million gallons at the end of last week, which in the light of 793.8 million gallons is just a drop in the bucket.
But the take-home point of the report is that inventory levels are at 5.2% over year-ago levels, while production of ethanol is also 6% ahead of year-ago levels. At this pace, this will continue to put both production and inventory levels in a strong relationship going into the winter and early spring, but will also likely limit any price support early next spring.
This may be beneficial for overall users and demand for product, but producers may find it difficult to increase margins through the winter months when typically margins improve as prices improve. The stable ethanol market price over the last two months could continue to cause the overall market place to become stagnant, and leave more of a level playing field; this would allow less room for market openings and long term contracts.
Ultimately EIA data did very little to move the market Wednesday, which is not expected, but the focus on how inventory and production track with previous year levels long term will be interesting to follow through the holiday season.
Rick Kment can be reached at firstname.lastname@example.org
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