Ethanol Blog

Ethanol Futures May be Past Tipping Point

Rick Kment
By  Rick Kment , DTN Analyst

The combination of eroding corn prices, and the confirmation that overall demand for ethanol is slowing in Wednesday's EIA report, has continued to push moderate pressure through the ethanol market.

Front-month September contracts lost 0.9 cent per gallon, falling to $1.448 a gallon. Over the last four trading sessions, ethanol futures have lost 4 cents per gallon. Although the movement of prices are not significant in themselves, the erosion of short-term and long-term support seen over the last three weeks is pointing to additional market pressure across the ethanol market.

For ethanol futures to flirt with the $1.50 per gallon threshold, but be unable to push through these price levels, as well as corn prices continuing to erode based on expected production levels through the fall, adds to the building weakness seen this week. This may create additional long-term pressure through the rest of the fall.

There still remains moderate late-year support across RBOB gasoline and crude oil markets, which traditionally has helped to keep ethanol markets from moving significantly lower. But if additional confirmation of record corn production continues to develop, there is likely to be follow-through pressure developing across the entire complex. This pressure will likely break through support levels of $1.366 per gallon set Aug. 2, and may lead the way to market weakness through most of the fall.

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

(ES)

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