Corn Market Driven By Ethanol

 

Ethanol remains the driving force behind the robust demand and prices in the corn market, but the industry that produces the fuel is undergoing some structural changes that bear watching.

“It’s an ethanol story – that’s the world we live in with feed prices,” says Mark Welch, economist with Texas A&M University.

Looking at supply and demand in the grain market, demand is strong and demand is high, he says. “Other factors are supporting what is happening in the grain market, but ethanol is the driver. It’s the big machine behind these current prices,” says Welch.

For this reason, he adds, it’s important to look at what’s happening in the structure and organization of the ethanol industry.

“We’re seeing a larger and larger percentage of ownership of ethanol production capacity by major oil companies,” he says. Current statistics peg that number at 10%, but Welch says that’s a “minimal” number in terms of what is going on behind the scenes with smaller percentages of ownership by the major companies of some plants.