Brazilian Exit of Biofuel Plant a Setback for Ethanol Futures Market

Ethanol futures may be in for a setback as Archer Daniels Midland sold their Brazil ethanol plant and is mulling the selling of their three US ethanol plants. Ethanol futures are up 42 points this week near $1.50 per gallon on the Chicago Board of Trade.

The agri-industry giant claims the business environment is in a “challenging” time for the biofuel, however, at one time the company was considered the leading champion of biofuels. Another reason, ADM cites, for closing down their Brazil ethanol plant is that they didn’t see their long-term objectives for their company, and their shareholders, being met.

If ADM is selling their biofuel ethanol plants, it may be a turning point in the ethanol (futures) market,” said Laura Taylor, a senior market strategist at RJO Futures in Chicago, sharing her fundamental assessment of the ethanol futures market. Taylor added,With all of the bad press with ethanol and the EPA – as well as the public – the writing may be on the wall for the long-term use of ethanol products.”

Ethanol futures have been in a tight sideways trading pattern for the past two years with a slight bias upward. With an agriculture giant such as Archer Daniels Midland looking to bow-out of the business, I am quite sure the ethanol futures market is watching the developments of this transaction closely.

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