Ethanol prices slipped lower once again Wednesday as traders pushed front-month February futures 1.9 cents per gallon lower, to $1.309 per gallon. The potential to push prices below the $1.30 per gallon price level have not happened since the initial month of when ethanol futures were established in 2005, and this could create some additional long-term pressure through the market.
Ethanol inventory levels increased once again at the end of last week by 8.4 million gallons. Total production increased once again last week according to the latest EIA data released Wednesday. This created even more uncertainty about just how much buyer interest will develop over the coming weeks.
The months of January and February traditionally are focused on rebuilding inventory, which will pressure price levels anyway. But with the aggressive near-record production levels seen through the second week of January, and already low prices, markets may start to become flooded with ethanol at prices so low that buyers are unwilling to pick up orders until spring buying activity starts.
Rick Kment can be reached at email@example.com
© Copyright 2016 DTN/The Progressive Farmer. All rights reserved.