Is Ethanol Driving Corn and Sugar Prices?

Cindy Zimmerman

With all the buzz about ethanol, some market watchers are predicting an increase in corn futures, while sugar futures are high and expected to go even higher, or maybe not. Market Watch Commodities Corner quotes analyst Chris Kraft saying, “Corn futures have the potential to explode higher due to increased demand from ethanol production.” Demand for the alternative fuel has already helped sugar prices double in the past six months to trade over 19 cents per pound on the New York Board of Trade — their highest levels since 1981. Corn has a long way to catch up. March corn trades around $2.25 a bushel on the Chicago Board of Trade, a five-month high. High sugar futures caught the attention of the Wall Street Journal this week as well, an article which was critiqued by Elliot Wave International’s Futures Focus. Sugar has tripled in value during the past two years. Prices have doubled in the past five months. They jumped 20% in just three sessions in mid-January. In short, sugar has been rallying. Just in time to explain the move, Thursday’s (Feb. 9) Wall Street Journal includes an in-depth look at this soft market that seeks to explain “Why Sugar Costs More And More.” At the top of their list: Ethanol. … Yet ironically, on the same day that the Journal finally devoted a thorough news story to sugar’s surge, prices for the soft saw their biggest single-session decline in months.
Bottom line – who really knows?