Ethanol prices take wild ride in December

Dec. 23—Ethanol prices saw a wild price shift in December leading to additional uncertainty through the ethanol and corn markets. Lack of active support in the corn market has kept corn prices hovering between $4.15 to $4.30 per bushel in the futures market. There’s been additional pressure in many cash markets due to the availability of corn following harvest. Uncertainty about political support in ethanol markets is creating some additional market movement in the front month futures prices. The biggest factor in the wild ride of ethanol futures, which moved prices more than 30 cents lower through the month of December only to regain most of the losses back by the end of the month, is growing ethanol supplies and production levels. After hitting a record low inventory level since 2010, when weekly inventory records were first collected, inventory levels rebuilt strongly based on increased production by ethanol plants. This move to higher production levels comes at a time when holiday demand remains good. But this is creating concern for many traders as to how far prices will fall once demand slows following the holiday season. With corn futures hovering close to $4 per bushel, it is unlikely that ethanol markets will see significant reductions over the near future, but this could limit long term support, and create even greater impact in the industry infrastructure.