How Does Ethanol React to Deflation?

We are not particularly interested in trading ethanol itself; rather we are interested in the confirming behaviour with respect to the breakout in crude (above $75).

Sure enough, Ethanol futures have broken to multi-week highs, breaching a 12 month old trading range. In support is the break higher in Archer Daniels Midland (ADM) and Corn futures.

A breakout in one index is interesting, but nothing to get to excited about. Concurrent break-outs in the broad commodity indices (CRB, DJAIG, Goldman, & Rogers) are more than interesting.

We think this represents the beginnings of a once in a lifetime wealth creation opportunity.

Is anyone trading against this trend? if so, how?

Disclosure: Long DBC, SLV, TBT.

Comments

[akapital:]

consider VRNM and BP partnership an ethanol trade. Their biomass to ethanol process is in the black if gas is north of $3.00 dollars a gallon. A good trade to hedge a long oil position with me thinks and to diversify the corn ethanol hedge.

Oct 23 03:58 PM