A good reason why Ethanol popped yesterday
As my colleague Jon Herring so kindly let me know, corn prices dropped sharply yesterday. As we all know, cheaper corn means better margins for ethanol producers.
I’m sure Pacific Ethanols earnings didn’t hurt things, either.
In the end, this drop in corn prices is sure to only be temporary. We’re likely to see corn prices push higher by the end of the year, meaning ethanol stocks might get hit with tighter margins later in the year (taking stock prices down).
Hmmm…
Although I am sure it is not a 1:1 correlation, this could make an interesting hedge. You could perhaps go long on Ethanol companies, hedged by going long on agricultural commodities.