Some Speculation on Ethanol

With all the action in wheat, the ethanol market has not received much attention. But an interesting situation has developed: The front month, September, is trading at 9 cents (5%) over October. Inventories are stable. Usage is declining as the summer driving season draws to a close.

Ethanol inventories nationwide were at similar levels when I took delivery just last Spring because the front month was at a 3 cent discount (yielding 3.75% annualized on cash for a month). Demand for ethanol rises through the summer with gasoline demand, but August averaged only 3 cents over Sep--and that seems high.

So either there is a localized shortage at exchange delivery points or there is a real market anomaly here. If there is not a localized shortage, that would indicate to me that there is speculation on a regulatory action raising the 10% blend wall. I'm looking into the exchange inventory situation...Meanwhile, I bought some Dec Ethanol vs Corn.