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US Ethanol Producers seek Pricing Reform as Markets Plunge

by Ketakee Srivastava
7 years ago
in News
Reading Time: 2 mins read
0

Stung by the collapsing prices, the U.S. ethanol producers are looking for changes in the way of establishing benchmark values for the biofuel.

They are arguing on the fact that the current system which is used by the exchanges is way too vulnerable for manipulation.

The major source of the push is the struggle faced by the key farm belt industry because of the weak demand growth.

The aggressive selling by Archer Daniels Midland Co who are the global commodities giant as well as the heavy loss because of the trade war between China and United States.

The above mentioned factors have succeeded in pushing the prices of ethanol to its lowest in 13 years.

Rise of ADM in Ethanol Market

ADM has better chances of surviving the long stretch of low prices.

But its US rivals are much more ethanol focused and many of whom have raised an alarming concern that the company is intentionally forcing the biofuel market lower.

Hence allowing it to tumble down so as to drive them out of business.

U.S. ethanol producers seek pricing reform as markets plunge
A complex network of pipes and tanks convert corn into ethanol inside the Lincolnway Energy plant in the town of Nevada, Iowa, December 6, 2007. REUTERS/Jason Reed

These companies are keenly looking for an alternative which could act as a shield protecting them from further dips.

POET LLC, the top US ethanol producer has already asked the CME group for a change in the pricing method. Hence making it a key swap contract which is used by the industry to hedge.

Critics announced that Platts price is quiet easily manipulatable. It is based on the deals that take place only for a time span of 30 minutes window per day, as opposed to happening the entire day.

U.S. ethanol producers seek reforms as markets plunge
U.S. ethanol producers seek reforms as markets plunge

Two traders confirmed that ADM in November represented 90 percent and even more of the sales in the Chicago Platts.

ADM refused to comment on the matter and never defended itself from the criticism it faced. It was all because they and even Platts did not immediately gave any reply.

Source :Reuters, Reddit

Tags: ADMBiofuelEthanolMarketsUSA

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