FocusUS ethanol brokers seek other commodities in quiet market

24 February 2012 15:37  [Source: ICIS news]

ORLANDO, Florida (ICIS)--The lack of trading in the US fuel ethanol sector since the start of year has caused some brokers to either get out of the market entirely or examine other commodity segments that may be more active, according to attendees at the National Ethanol Conference, which ends on Friday.

Ethanol brokers have attributed the noticeable drop in trading activity to the recent loss of the volumetric ethanol excise tax credit (VEETC) and tariff at the end of 2011. Others had attributed the thinly traded market to low ethanol prices and a lack of direction in corn prices, which have resulted in negative margins for producers.

Corn prices have been moving within a range of about $6.00-6.50/bushel so far this year.

Meanwhile, current Chicago fuel ethanol spot prices were last seen at $2.16-2.19/gal, down from $2.42-2.44/gal a year earlier.

Chicago fuel ethanol prices have recovered slightly from a 2012 low of $2.07-2.11/gal on 18 January.

One broker also said traders took positions in December ahead of the expiration of the VEETCH and tax credit, which may have resulted in ample supply in the first quarter.

One major trading group was also said to have been selling product at prices so low in January and February that it had undercut the need for ethanol brokers.

However, this occurrence is not unusual within the fuel ethanol industry.

“This happens about once or twice a year,” said an ethanol fuels marketer on the sidelines of the conference.   

As a result of the minimal trading volumes in the fuel ethanol market, some brokerage firms have looked to diversify their portfolios.

Some brokers have been able to shift their focus instead on natural gas liquids (NGL), reformulated gasoline blendstock for oxygenate blending (RBOB) and crude options.

Other ethanol brokers have also looked at the possibility of even moving into the US aromatics sector.

The National Ethanol Conference in Orlando, Florida, runs from 22-24 February.

By: Brian Balboa
+1 713 525 2653

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