by Rick Kment
Ethanol futures continue to move sharply higher early Monday, with traders focusing on the strong gain seen in the corn futures market Monday, but they are also still trying to work through the significant gains posted late last week. Front-month March ethanol futures rallied 4.8 cents per gallon, to close at $2.592 a gallon. The front-month contract is now trading at a 2.5-cent-pergallon premium over the April contract, which will soon become the front-month contract month. Additional support is expected to trickle into the market through the next two sessions following any additional support in the corn market.
RBOB gasoline futures had slight losses early Monday, as traders slowly backed away from concerns of sharp price rallies due to the Middle Eastern crisis. Although the threat to the oil supply remains, there is a sense of pulling back from the market. This coincides with the end of February, where noncommercial traders liquidate positions before month's end. March futures fell 0.99 cents per gallon, to $2.7296, with other nearby contracts reduced prices 1 to 1.59 cents per gallon on a sluggish market. The market overall tone remains unsettled, with the potential of additional strong buying support redeveloping after March 1.
Crude oil futures backed away from the late-week rally, although there seems to be support at prices well above $95 per barrel at this point, given the uncertainty of the Middle East and overall long-term supply availability. The lack of news throughout the region seems to have calmed traders down a bit, as a portion of the losses Monday may be associated with overprotection by some traders late last week. April futures closed 91 cents lower, at $96.97 per barrel, while other nearby contracts fell 50 to 72 cents per barrel lower in slow end-of-the month trade.
Spot ethanol prices bounced higher late in the day, following the renewed support in the corn futures market before closing bell. Regional hub locations posted prices 3 to 5 cents higher as traders focus on the increased cost of production as well as the strong shift higher through the ethanol futures market Monday.
Ethanol rack prices soared higher, following the combined support in the ethanol futures market, as well as higher gasoline prices through the end of last week. The national average rack price increased 2.44 cents per gallon, to $2.65 a gallon. Most states posted prices steady to 4 cents higher, as terminal operators focus on the expectation of additional demand, as well as adjusting inventory levels in the direction of the gasoline market.
Ethanol plant profitability levels continue to slide lower, as the cost of corn needed to produce ethanol increased Monday, due to a 10-cent rally in corn futures prices on the Chicago Board of Trade. Neeley Biofuels had a 2-cent per gallon reduction at the hypothetical plant, pushing net losses to 30.2 cents per gallon. The purpose of the plant is measure how changes in commodity prices affect plant margins.
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