Ethanol Market Update - 1/20/26

Overview

Market Overview

Ethanol futures closed the week on firmer footing, with prices recovering modestly after the sharp selloff seen earlier in January. The curve rebounded in a measured fashion on Friday, supported by improved participation and steady physical market signals. While broader sentiment remains cautious, downside momentum has clearly slowed.

The front end led the move higher, with CU Jan settling at $1.54, up 0.5¢, while deferred months posted gains of 1.0–1.25¢. The structure remains backward, but the recent steepness has eased as selling pressure subsides and spreads stabilize.

Trading activity picked up modestly into the end of the week, with volume concentrated in Q1 and early Q2 contracts. The rally appears technical in nature, reflecting short-covering rather than a shift in underlying demand.

Production Overview

U.S. ethanol production remains steady following last week’s price volatility. Liquidity Energy’s internal production model shows output largely unchanged, with plants maintaining disciplined run rates amid weaker flat price signals.

• Estimated Production: ~1.12–1.13 MMbpd

• Utilization: ~75–76%

• Operating Environment: Stable

Margins have narrowed but remain workable for most producers. Corn costs are steady, coproduct values remain supportive, and there are no widespread outages or logistics disruptions reported. With winter demand seasonally soft, producers appear focused on inventory management rather than incremental output growth.

Futures & Curve Structure

Ethanol CU – 1/16 Settlements

• Estimated Volume: 1,891 contracts

• Open Interest: 38,233 contracts

The curve remains backward through mid-2026, though the front-end discount has narrowed. Q1 values continue to trade at a meaningful discount to Q2, reflecting ample nearby supply and limited urgency from blenders.

Market Insight

The ethanol market appears to be entering a consolidation phase following last week’s aggressive liquidation. Price action on Friday was orderly, with gains evenly distributed across the curve and no signs of stress in cash markets.

While demand remains seasonally muted, the absence of forced selling and the return of modest buying interest suggest that much of the downside adjustment may already be priced in. Near-term direction will likely remain spread- and flow-driven, with exports and blending economics dictating incremental moves.

Absent a material change in production or demand, ethanol is likely to trade in a tighter range heading into late January.

Summary

Ethanol futures ended the week firmer, with CU Jan settling at $1.54 and deferred contracts posting modest gains. Production remains stable, margins are compressed but workable, and the forward curve continues to reflect a well-supplied nearby market.

The broader tone is steady rather than bullish, but the market has clearly found footing after recent weakness. Attention now shifts to whether demand improves enough to support further recovery or if the market settles into a prolonged sideways trade.

Technicals

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The Coolidge Report is published by Coolidge Shop LLC and is intended for informational purposes only. This report does not constitute trading recommendations, financial advice, or an offer to buy or sell any commodity. While efforts are made to ensure accuracy, Coolidge Shop LLC makes no warranties regarding completeness or reliability. Coolidge Shop LLC is not registered as a Commodity Trading Advisor (CTA) with the CFTC, and this report should not be interpreted as a solicitation to engage in futures or derivatives trading.

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