Ethanol futures continue to surge higher over the last three weeks with prices now moving above $1.63 per gallon, and the highest prices seen since December.
It is not necessarily the price that is a concern at this point, but how traders got to this price. The fact that seasonal support has been a major driver of the market is no shocker, but with little to no market corrections or even breathing room for traders to take a break and process the upward trajectory.
This type of market moves makes the ethanol market extremely ripe for a major fallout in the near future even though there continues to be moderate to strong commercial support under the market in the long term. It is expected that the long-term uptrend in the ethanol market will likely hold until May or June, when the driving season traditionally will end, but it is unreasonable that this type of support will be able to last that long.
Making a major break by an outside market is likely a key factor in the driving force of the ethanol markets shift in the near future. But for now, ethanol buyers remain aggressive and try to guess when to pull out, which isn't always easy to decide with fast moving, rocket-like markets.
Rick Kment can be reached at email@example.com
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