| NEW YORK/CHICAGO, June 2
NEW YORK/CHICAGO, June 2 The rise in U.S.
ethanol prices, which hit their highest in 18 months on
Thursday, could be about to lose steam as the move draws more
production back into the market and potentially puts off buyers,
traders and experts said.
Cash prices have been following futures prices for ethanol,
corn and gasoline higher. Midwest prices of the biofuel are at
their highest in just over a year, helping to lift margins for
producers like Archer Daniels Midland Co and Green
Plains Inc after one of their toughest quarters in
But some said the higher prices could curb demand,
particularly in export markets, or draw in imports of the fuel
from other countries.
New export "business isn't getting booked at these prices,"
said a U.S. ethanol trader who requested anonymity.
Exports in the first three months of the year were up 5
percent from the same period in 2015. The U.S. Department of
Agriculture is due to release April data on Friday.
The most-active Chicago Board of Trade ethanol contract for
July delivery rose as high as $1.677 per gallon before
settling up 0.7 percent at $1.66 per gallon.
The second-month is up nearly 20 percent
year-to-date, largely riding the coattails of rising corn
and crude oil prices.
Ethanol inventories declined to their lowest levels this
year, U.S. government data showed on Thursday, helping to fuel
Stocks declined by 44,000 barrels to a 2016 low of 20.77
million barrels in the week ending May 27, according to the U.S.
Energy Information Administration. Production averaged 960,000
barrels per day, up 1.5 percent from the prior week.
"People were surprised the EIA production numbers aren't
higher. Most people were looking for gains of 2 to 3 percent,"
said Jerrod Kitt, an analyst at brokerage The Linn Group.
Many plants typically shut during April or May for regular
maintenance and come online ahead of the Memorial Day weekend,
the kick-off of the summer driving season, which fell on May
28-30 this year.
While plants are ramping up more slowly this year, domestic
demand will be higher than last year, thanks to higher
government mandates. That has helped improve profit margins and
will continue to tempt producers to bring idle plants back on
"Margins were too thin a while back for the plants to keep
running," said Bruce Babcock, an economics professor at Iowa
State University. "Those production rates will continue to
(Reporting by Chris Prentice in New York and Michael Hirtzer in
Chicago; Editing by Cynthia Osterman)