Market and product
US ethanol prices rally after hitting four-year lows
The Chicago Argo ethanol assessment Tuesday rose 5.7 cents to $1.5650/gallon, the first three-session rise since August 21.
The front-month New York Harbor ethanol assessment also surged, rising 8.3 cents Tuesday to $1.6930/gal, up 13.3 cents, or 8.5%, since hitting a four-year low Thursday.
The Argo assessment similarly rallied 10.5 cents, or 7.2%, since Thursday, falling to the lowest level since December 2008 for the 17th time in the last 19 sessions.
"The buyers seem to think we've hit a floor in this," one broker said. "We're moving up, barring a blip on Wednesday."
Multiple sources pointed to more bearish data in the US Energy Information Administration's weekly report due Wednesday as a possible interruption to the rally.
On Wednesday, the data showed US ethanol stocks for the week ended September 26 rose 236,000 barrels to reach an 18-month high of 18.828 million barrels despite a production decline of 8,000 b/d to 881,000 b/d.
If supplies finally tighten, as many market participants have predicted for weeks amid multiple cargoes leaving the US Gulf Coast, then a full-blown rally could take place Wednesday and Thursday, one trader at a major blender said.
"People are trying to get ahead of this thing today, before it's too late," the trader said.
Rallying corn prices also have boosted ethanol prices. After making their biggest single-day gain in a month Monday, December corn futures on the Chicago Board of Trade settled 8 cents higher Tuesday to $3.4050/bushel.
The Chicago Argo ethanol assessment plunged nearly 40% in September on swelling supplies, putting a dent in producer margins.
The estimated production margin for a typical US Midwest dry-mill ethanol plant fell 6.22 cents, or 11.32%, to a 14-month low of 48.71 cents/gal, a review of US Department of Agriculture and Platts data showed Friday.
The margin fell for the sixth straight week to the lowest level since July 2013 as ethanol prices tumbled in response to bearish supply data.
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