With the news that the corn stock was over by 400m bushels, traders and industry started fearing that Ethanol will pick up the slack to use the stock.
Reasons why I think this to be not in the cards :
1. As the price of corncame down, ethanol got a better margin ( than before). But not enough to make it economical for someone to open a plant. So why not?
2. We have heard that 'All Politics are Local". Well, most ( all if one take out PEIX plants in CA) ethanol plants are local too. So where there is no corn, the plants closed down. So taking the cheaper to the ethanol plants, still cost MONEY. This will keep the closed plants closed until there is local corn!
3. Where there was some extra corn AND the plant Operator had a guaranteed marketplace, LIKE VALERO, they were already in the process of opening the plants to meet their demand.
4. Now the fact that RINs are still up for D6 ( corn ethanol), there is still demand for
'extra rins' for a few small obligated parties whoi will sell fuel without ethanol. Pay up!
What will happen to the extra corn?
a) This 'extra' corn is not one person hand. It is all over. Everyone thought that the supply was going to be short. So everyone has a little bit 'extra', but has a sure base.
b) as time goes by ( weeks into 1 month 2 months), rpice will come down.
d) everyone will hold, waiting for many be some bad weather news.
e) at some point between now and June, the Chinese will step in an buy some of it for September. Sweeo the bottom of the barrels...
So, for ethanol, steady as she goes. The industry has learned how much they can sell, and how much they can produce. Watch for Spring Production to go up a bit to match demand 830-850kbpd. If supply goes up higher than this, watch for exports ( Canada and Mexico and others) to buy the ethanol supply.