Chicago Argo ethanol, the key US Platts ethanol assessment, fell 2 cents Thursday morning as the CBOT March corn futures contract plummeted 4 cents and producers sought to grasp at improved margins.
Chicago Argo was assessed at $1.3850/gal Wednesday and was heard bid at $1.3550/gal and offered at $1.3750/gal with an earlier trade at $1.37/gal Thursday morning.
Sources described a market that continues to be saturated with product and insufficient buyers.
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"Stocks are still pretty high and yesterday's high plant output is putting some pressure on the flat price," said one trader, referring to the continuing pressure on the ethanol industry from high stocks.
"Producers are selling again. Corn is down so they are locking in some margins," said another source. As corn futures fall, producers buy the feedstock while simultaneously selling second quarter ethanol swaps. The second-quarter CU swap was indicated at $1.41/gal Thursday morning.
The lower feedstock price was a welcome stimulus to a market that has been plagued with thin margins.
But the margins only hold as long as the ethanol price stays at a high enough premium to corn prices.
"The market can only take so much before it gets forced down and producers are willing to sell as long as corn is going down," said a trader.