Ethanol outlook changing with drought, soaring prices

Agri-View
Posted: Thursday, July 12, 2012 8:00 am

Drought and soaring corn prices are changing the ethanol dynamics for the upcoming marketing year, according to last week’s CME Group report. September corn prices have soared by 36 percent in the space of just three weeks, rallying to a 10-month high of $7.14. Ethanol prices have largely kept pace with that rally but the September ethanol-corn margin is still negative at -11.5 cents per gallon. Ethanol producers had been hoping for a bumper crop this summer that would provide plenty of corn and better ethanol-corn profit margins. However, the corn supply outlook has now tightened up due to a month of severe heat and dry conditions.

The USDA in June forecasted that corn ending stocks would more than double to 1.881 billion bushels in 2012/13 from only 851 million bushels in the current 2011/12 marketing year.

Read more