Ethanol Market Update - 1/27/26

Overview

Market Overview

Ethanol futures extended their rally on Tuesday, with strong gains posted across the curve as the market responded to improved demand sentiment and tightening nearby structure. The front half of 2026 led the move higher, while deferred months followed in an orderly fashion, keeping the curve backward but well supported.

The rally appears largely positioning- and spread-driven, with increased commercial participation noted in Q1 and Q2 contracts. The market continues to recover from last week’s lows, aided by firm cash markets and steady production fundamentals.

Production Overview

U.S. ethanol production remains steady as January progresses, with no material changes in operating rates observed across the system.

• Estimated Production: ~1.12–1.13 MMbpd

• Utilization: ~76–77%

• Operating Environment: Stable

• Outages: None widespread or disruptive

Margins remain workable for most producers, supported by manageable corn costs and consistent coproduct demand. With no significant weather or logistics disruptions reported, production is expected to remain flat near current levels into early February.

Futures & Curve Structure

Chicago Ethanol (Platts) – 1/26 Settlements

Curve Metrics

• Q1 Avg: ~1.637

• Q2 Avg: ~1.700

• 1H Avg: ~1.669

• Structure: Backwardated, tightening

The front-end strength continues to compress spreads, reflecting improved prompt demand and reduced downside pressure. Q1 has narrowed meaningfully versus Q2, suggesting near-term supply comfort is diminishing.

Volume & Open Interest

• Estimated Volume: ~5,100 contracts

• Total Open Interest: ~40,300 contracts

Open interest increased alongside rising prices, signaling new length entering the market rather than short-covering alone. Participation was strongest in February through May contracts.

Market Insight

Tuesday’s advance reinforces the market’s shift away from a defensive posture seen earlier this month. While no single fundamental catalyst stands out, the combination of steady production, firm cash markets, and tightening spreads has improved sentiment materially.

Absent a sharp downturn in energy markets or a sudden production surge, ethanol futures appear positioned to consolidate at higher levels, with Q1 values now rebuilding a more constructive base.

Summary

Ethanol futures posted strong gains on Tuesday, led by the front half of the curve, with Feb 26 settling at $1.655 and Q2 pushing above $1.70. Production remains stable near 1.12–1.13 MMbpd, and spreads continue to firm as commercial interest returns.

The tone remains constructive heading into midweek, with price action suggesting improving balance rather than speculative excess.

Technicals

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