Trade through the ethanol market seems to indicate additional aggressive buying still stepping in. Traders are focusing on supplies that seem to tighten week-after-week, even when production levels are starting to increase.
Over the last two months, ethanol futures prices increased more than $1 per gallon. The April contract has moved to the highest price for front-month futures since August 2011.
Traders are looking for additional support as corn markets continue to show moderate strength over the near future and there is very little indication that supplies will grow significantly through the spring and early summer months. As seasonal driving demand starts to increase, there will be even more need to secure short- and long-term supplies by end users on the coasts. Spot ethanol prices are well over $4 per gallon across the East Coast; West Coast locations are nearing the $4 per gallon threshold.
Given the stability in gasoline prices so far this spring, a swift shift to lower demand is not expected. But if this supply tightness continues, expect some market reaction during peak summer demand.
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