Commodities: Ethanol futures falling fast

By Rick Kment, DTN | October 01, 2014

September saw a near freefall in ethanol futures as prices declined 62 cents per gallon and additional price pressure is likely still to come. Front month October ethanol futures fell from $2.20 per gallon at the end of August (before Labor Day weekend) to $1.58 in late September.

The market is focused on many factors, including falling corn prices before an expected record harvest, growing ethanol inventory levels and eroding demand. Demand softness is not unexpected at this time of year with driving declining seasonally. Lower prices are expected to help export demand long term but exports are a small piece of the ethanol price pie.

Corn prices lack support ahead of an expected record crop. Transportation delays and challenges, which have plagued the grain industry all year, are likely to make the situation even worse, possibly limiting the value of Corn Belt crops. Concern about another ethanol glut, with inventories well above movable levels, has pushed prices to lows not seen since June 2010. This could further limit buyer interest as prices may continue to weaken in the near future.   

Gasoline Prices (By Region)

REGION

SPOT

RACK

West Coast 

$2.7420

$2.8056

Midwest    

$2.7420

$2.6266

East Coast 

$2.7191

$2.6469

Front Month Futures Price (RBOB) $2.6619

 

Ethanol Prices (By Region)

REGION

SPOT

RACK

West Coast 

$1.7200

$1.8500

Midwest    

$1.5900

$1.9414

East Coast 

$1.6800

$1.8293

Front Month Futures Price (AC) $1.5800