Ethanol Market Update - 1/21/26

Overview

Market Overview

Chicago ethanol futures staged a broad-based rally Tuesday, reversing part of the recent mid-January selloff. Strength was most pronounced in the front half of the 2026 curve, with February and March leading gains as buying interest returned following last week’s sharp downside correction.

The move appears driven by value-based reentry rather than a shift in core fundamentals. Volumes expanded notably, particularly in nearby months, while open interest increased — a signal that new length entered the market instead of simple short covering.

Despite the bounce, the broader tone remains cautious. The market continues to balance stable supply against seasonally soft winter demand, keeping rallies orderly rather than impulsive.

• Estimated Volume: 3,720 contracts

• Total Open Interest: 38,578 (↑)

Production Overview

U.S. ethanol production remains steady and disciplined as plants operate through the winter demand lull. Margins are holding workable levels, supported by manageable corn input costs and consistent coproduct pricing.

• Estimated Production: ~1.12–1.14 million bpd

• Utilization: ~75–77%

• Operating Conditions: Stable, no widespread outages reported

With winter blending rates limiting incremental demand, production is expected to remain flat in the near term barring weather or logistics disruptions.

Futures & Curve Structure (1/20 Settlements)

Curve highlights:

• Nearby contracts outperformed, modestly re-steepening the front end

• Q1 regained ground lost earlier in the month but remains below early-January highs

• Backwardation remains limited, signaling adequate near-term supply

Market Insight

Tuesday’s rally reflects a market resetting after an oversold condition rather than responding to new bullish fundamentals. Spreads remain relatively compressed, indicating that supply availability is still sufficient to meet near-term demand.

Absent a material shift — such as stronger export pull or an unplanned production disruption — ethanol futures are likely to remain range-bound, with price discovery driven by spreads, relative value, and producer hedging interest into Q2 and Q3.

Summary

Ethanol futures rebounded on January 20, with Feb 26 settling at $1.585 and strength extending across the 2026 curve. Trading activity and open interest both increased, suggesting renewed engagement after last week’s selloff.

Production remains stable, inventories appear manageable, and winter demand continues to cap upside potential. The market has found short-term footing, but fundamentals still point to a balanced, orderly environment rather than a sustained directional move.

Technicals

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