Ethanol prices climb as coastal pressures mount

March 1, 2006

Ethanol prices began moving to the beat of their own drum early in 2006, with strong demand in coastal markets pumping up prices amid thinning availability. That also put upward pressure on seasonal term contract deals, market sources said.

In Chicago, spot barge deals trading around $2.25 in mid-January could not be touched for less than assessments in the $2.40s per gallon by the end of the month, with most prompt offers hovering at $2.50 per gallon or higher. Over the same period, plant FOB prices were up 10 to 25 cents, with some selling bulk truck volumes at more than $2.40 per gallon. Though some smaller plants were still offering in the $2.10-to $2.15-per-gallon range, they were also firming offers even as bulk slowed.

At the rack, the anomaly of cheaper rack prices persisted, though postings for top-off sales also generally moved up. In Iowa, average ethanol rack prices gained 18 percent in January, with those in Illinois up 14 percent and Nebraska gaining 20 percent.
Much of the pressure on ethanol came from early preparation from refiners abandoning MTBE in gasoline, particularly in the East. More product was being devoted to the East, while New York spots surrounded $2.70 per gallon.

Volatile NYMEX unleaded front-month values actually closed out the month nearly 2.5 cents lower than they began. Gasoline pump prices turned higher at the end of the month, averaging over $2.32 per gallon nationally, but remained much softer in the Midwest, slipping to less than $2.22 per gallon on average.

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