REMINDER:  CBOT Ethanol New Trading Hours - Beginning July 1, electronic trading hours for the CBOT ethanol contracts will be expanded in the morning by one hour and fifteen minutes, until 7:15 a.m. The new electronic trading hours will run from 6:00 p.m. to 7:15 a.m. Chicago time Sunday through Friday for futures and options on futures for CBOT ethanol contracts.

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The ethanol market this week will focus on:

• the April monthly ethanol report from the EIA, which may show a decline in ethanol production after the sharp 9.5% increase seen in March,
• gasoline prices as the petroleum markets watch demand and inventories,
• corn prices ahead of Monday's USDA Crop Progress report (70% of the corn crop was in good-to-excellent condition in last week's report), Tuesday's Acreage Report (corn planting expected down 1.0% to 84.16 million acres from the USDA's Prospective Plantings estimate of 84.99 million), and Tuesday's Quarterly Grain Stocks report.

July CBOT Ethanol futures prices last week moved sideways near a 1½-month low and closed 3.0 cents lower (-1.8%) at $1.678 per gallon.  Bearish factors last week included the 2.6% sell-off in gasoline prices, the 3.8% sell-off in corn prices, the weekly DOE report showing a 2.4% w/w decline in fuel demand in the week ended June 19, and some continued technical selling with the 2-week downtrend.

The ethanol industry got a big win when the climate change bill passed by the House last Friday contained a provision that prevents the EPA from penalizing ethanol for "indirect land use change" for 5 years while a full-scale scientific study is conducted.  After the study, the EPA, USDA and DOE will all have to agree that there is a solid scientific basis for ILUC before biofuels can be penalized on its CO2 emission calculations.  However, the ethanol industry must now make sure the same provision gets into the Senate's version of the climate change legislation.

Ethanol/Gasoline - July gasoline futures prices last week moved sideways below the recent 8-month high and closed -5.03 cents (‑2.6%) at $1.8741 per gallon.  Bearish factors included (1) the second straight week of a relatively large rise in gasoline inventories, which left gasoline inventories very close to the 5-year seasonal average, and (2) the 2.4% decline in fuel demand in the latest reporting week.  The spread of ethanol minus gasoline prices last Tuesday moved higher from the recent 9-month low of -33.2 cents and closed the week up +2.0 cents at -19.6 cents.  However, that still leaves ethanol in a strong demand situation relative to gasoline.

Ethanol/Corn - July corn futures prices last week extended the sharp 2-1/2 week sell-off and closed the week down 15.0 cents (-3.8%) at $3.8425 per bushel.  Corn prices have plunged by a total of 70 cents (15%) in the past 2½ weeks because of good corn crop conditions, favorable weather, and heavy long liquidation pressure.  Due to the continued sell-off in corn prices, the July ethanol-corn crush margin last Friday closed 2.4 cents higher at a 7-month high of 30.6 cents per gallon.  The 15% plunge in corn prices in the past 2½ weeks has been very encouraging for ethanol producer profitability, although there is a long way to go before the industry can be fully comfortable.

Ethanol Calendar

• June 29 week: EIA Monthly Ethanol Report
• June 30:  USDA Acreage Report
• July 1:  Weekly DOE Gasoline Inventories
• Jul 10: USDA WASDE Crop Supply-Demand

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