The price of ethanol plummeted last month, and that drop is continuing today. The Wall Street Journal reported that the price of ethanol dropped 28 percent during September. Barchart reported that ethanol futures for November delivery are currently at 1.505, down from its 52 week high by a margin of 23.62 percent.
Declining domestic demand for the fuel led producers to hold on to their largest inventories since March 2013. The Journal also noted that ethanol demand usually falls off after the summer months, but this year's drop was far more pronounced than usual.
"Demand for gas went off a cliff in early September, and ethanol blending fell off with it," said Geoff Cooper, senior vice president at the Renewable Fuels Association to The Wall Street Journal
Seeking Alpha reported that record corn harvests this year led to a large drop in its price. In response to the sizable inventories, ethanol producers are cutting back on production. Seeking Alpha also noted that industry margins fell to about $0.22 per gallon. in late September, down from its all-time high of $2.04 per gallon in April. Producers hope that cutting back on the supply will help the price climb back up.
"Ethanol margins have largely bottomed out for the short term and will likely rebound in the next three to six months due to exports," said Citi analyst Aakash Doshi
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