CME Ethanol Outlook Link
The Ethanol Crush is Page 14. Although it isn't labeled as such, the chart appears to be a rolling futures chart with the most recent price drop due to the premium Sep Ethanol contract being replaced by a lower priced new contract and the Sep Corn being replaced by higher priced forward Corn. I made a few comments on this in the Comments section of the previous post.
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Thank you, that's great!
ReplyDeleteWith everyone and their mother bullish corn, I'm trying to think against the grain by analyzing ethanol margins. With tight projected new crop corn carryout, the market has undergone a very impressive rally. If we continue to push corn futures prices higher, we're going to approach breakeven ethanol crush margins.
While most people in the industry feel there's limited downside to corn prices, everyone needs to remember that 1 out of every 3 bushels of corn is sold to the ethanol industry. If they start to approach negative cash flow, that will likely begin to have a material impact to the industry's corn demand.
Trying to think a bit like a contrarian....
I prefer being long ethanol and oats to corn, because the long corn trade looks so crowded.
ReplyDeletehttp://cftc.gov/dea/options/ag_lof.htm
But the cornsupply/demand balance does look very tight... I would rather play that by buying the front/selling the back on corn calendar spreads than by taking an outright long position. The nearby Dec/March corn spread is still close to full carry.