Governors' Biofuels Coalition

Ethanol prices have remained relatively stable in the last four weeks. Front-month futures have fallen just 3 cents per gallon despite strong demand for blending through the end of August. The shift in the ethanol market has been dynamic, moving away from continued support in RBOB gasoline and toward recent losses in the corn market.

Corn futures have moved to new contract lows; September was trading at $3.16 per bushel when this was written. The focus of the corn market has turned to expectations for record production which will increase overall supplies without a significant shift in demand. These lower corn prices mean lower production costs for ethanol, potentially improving plant margins.

But on the energy side, recent stability and slight drawdowns in supplies through late summer are expected to keep buyers active. Long-term pressure is likely to be seen, eventually, due to significant production increases. RBOB gasoline markets continue to hold a strong premium to the ethanol market, which will limit additional ethanol losses over the near future.

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